Euro zone government bond yields edge up after US data

By Stefano Rebaudo

Feb 7 (Reuters) - Euro zone government bond yields rose after U.S. unemployment data supported expectations that the Federal Reserve would postpone interest rate cuts until at least June.

U.S. job growth slowed more than expected in January, likely restrained by wildfires in California and cold weather across much of the country, but the unemployment rate was at 4.0%.

Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, was up one basis point (bp) to 2.38%. It was down one bp before data. It hit 2.345% on Wednesday, its lowest level since January 2.

German two-year yields DE2YT=RR, more sensitive to European Central Bank rate expectations, rose 2 bps to 2.07%.

Money markets priced in a European Central Bank deposit facility rate at 1.91% in December EURESTECBM7X8=ICAP from 1.9% before the U.S. data.

Traders of short-term interest-rate futures continue to bet the Fed will next cut its policy rate in June, and that a second rate cut by the end of 2025 is likely.

The euro area neutral level for the deposit rate, which neither stimulates nor restricts growth, is now seen between 1.75% and 2.25%, the ECB said earlier in the session.

The ECB should stand ready to ease borrowing costs to a level lower than neutral to boost growth, ECB policymakers Olli Rehn and Mario Centeno said recently.