(Adds background, updates prices) LONDON, Oct 11 (Reuters) - A selloff in European bond markets gathered pace on Monday, with German debt yields rising to their highest since May while money markets moved to fully price in a European Central Bank rate hike by the end of 2022. The fresh jump in bond yields, pushing prices down, was led by Britain. Short-dated gilt yields jumped to their highest levels since early 2020 after weekend comments from Bank of England governor Andrew Bailey and policymaker Michael Saunders expressed concern about rising inflation. Gilt yields rose more than 5 basis points, dragging up euro zone bond yields. Switzerland’s 10-year bond yield rose to its highest since late 2018 at around -0.051%. The gap between 10-year gilt yields and Bund yields widened up to 135 bps - the widest since 2016 . “Generally everything comes down to inflation and inflation expectations, which are rising. Higher inflation expectations are pushing up yields and bringing forward the implied reaction from central banks which is also negative for bond markets,” said Peter Schaffrik, macro strategist at RBC Capital Markets. “As for the implied central bank reaction, the UK is left right and centre of this.” Germany’s benchmark 10-year Bund yield rose 2.5 basis points to -0.108%, its highest since May. It has risen more than 20 bps in the past month and is getting close to positive yield territory. Eonia money market futures dated to the European Central Bank’s December 2022 meeting now see a more than 80% chance of a 10 bps move, compared with a roughly 60% chance on Friday. Market pricing briefly jumped to a 100% in early trade as the hawkish Bank of England comments rippled through markets. The chance of a September 2022 ECB rate hike stood at more than 70% versus roughly 50% at the end of last week, according to the money market pricing. The current bout of inflation in the euro zone is not a trigger for monetary policy action, European Central Bank chief economist Philip Lane said on Monday. “Euro zone rates should display better resilience than their U.S. peers but, ultimately, inflation is also causing some concern among ECB members,” said ING senior rates strategist Antoine Bouvet. “(ECB chief Christine) Lagarde tried to assuage the market’s inflation fear but the front-end continues to bring forward the date of the first hike.” The European Union hired banks on Monday to sell its first ever green bond, memos from two lead managers seen by Reuters showed, taking its first step towards becoming a major force in the environmentally friendly debt market. In the United States, while Friday’s non-farm payrolls number was weaker than forecast, it was not weak enough to convince markets that the U.S. Federal Reserve would not push ahead with a tapering of its bond-buying stimulus in the weeks ahead. Reporting by Dhara Ranasinghe, additional reporting by Stefano Rebaudo; Editing by Andrew Heavens Our Standards: The Thomson Reuters Trust Principles.