* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Recasts first paragraph, adds analyst comment) LONDON, July 1 (Reuters) - German bond yields edged up on Thursday while peripheral borrowing costs fell, but the move lacked a clear driver as investors were waiting for jobs data on Friday to bring clarity. Yields dropped in the previous session in a move some analysts attributed to month-end flows and to worries about the spread of new variants of the coronavirus. “So far this week, rates markets have been mainly driven by concerns around the spread of the Delta variant,” as shown by the fact that the real-yield component has mainly driven the decline in bond yields, Unicredit analysts say. German 10-year Bund yield was up 0.5 basis point on the day at -0.2% at 1519 GMT. Portuguese, Spanish and Italian 10-year yields were down about 2 basis points . Italy’s inflation-linked government bond yield was down 3.5 basisp points. Following the U.S. Federal Reserve’s surprise hawkish shift at its June meeting, investors are waiting for payrolls data on Friday. “How markets react to these readings could determine the behaviour of rates over summer,” wrote ING rates strategists in a note to clients. “They should provide a better indicator of how seriously markets have taken the Fed’s hawkish warning shot – we are watching the front-end.” Ahead of Friday’s numbers, data showed U.S. private payrolls increased more than expected in June. Meanwhile, U.S. manufacturing activity grew at a moderate pace in June, but employment in the sector contracted for the first time in seven months, likely because of shortages of raw materials and labour. The euro zone’s economy still faces risks from virus mutations, European Central Bank President Christine Lagarde said, speaking before the European Parliament in her role as chair of the European Union’s financial stability watchdog. Euro zone manufacturing activity expanded at its fastest pace on record in June, according to a survey on Thursday, which also showed that factories faced the steepest rise in raw material costs in more than two decades. But inflation data on Wednesday showed euro zone inflation eased in June, in line with forecasts. A gauge of long-term inflation expectations - the five year inflation forward - fell to 1.5766%, having been knocked off a three-week high on Wednesday. The ECB has planned “several meetings” of its policymakers in the coming weeks, in a bid to iron out differences about the ECB’s new inflation strategy. In terms of issuance, France auctioned around 11 billion euros ($13.04 billion) of longer-dated debt while Spain sold 5.3 billion euros ($6.28 billion) of 5, 7, and 30-year debt. ($1 = 0.8437 euro) (Reporting by Elizabeth Howcroft and Stefano Rebaudo; Editing by Jonathan Oatis) Our Standards: The Thomson Reuters Trust Principles.