* Shares up 4.3 percent at C$16.03
* Profit levels tied to bond yields, stock markets
* U.S. 10-year Treasury up sharply in past to days
TORONTO, Dec 8 (Reuters) - Shares of Manulife Financial <MFC.TO> jumped more than 4 percent to hit a four-month high on Wednesday as soaring U.S. bond yields brightened the profit picture for the company, Canada's largest insurer.
Weak bond yields -- which move in opposition to rising bond prices -- have contributed to two straight quarterly losses at Manulife, as they force the insurer to hold more capital to ensure it can meet future payout obligations.
Bond yields have been low for several reasons, including nervousness about the economic recovery and the European debt crisis, which prompted investors to flee European bonds in favor of U.S. Treasuries, thus driving their prices up and yields lower.
But yields jumped to a six-month high on Wednesday, after a deal to extend U.S. Bush-era tax cuts fueled fears of inflation and a swelling budget deficit.
"Rising interest rates are positive for all the life insurance companies. Manulife is the most sensitive and so benefits most from the recent increase in 10-year Treasury yields," said Robert Sedran, an analyst at CIBC World Markets.
The yield on the benchmark 10-year Treasury note was around 3.305 percent on Wednesday, up from less than 3 percent two days ago.
Just after midday, Manulife's shares were up 66 Canadian cents at C$16.03.