Euro area yields set for a weekly rise after mixed US data

By Stefano Rebaudo

Feb 14 (Reuters) - Euro zone government bond yields were set to end the week slightly higher after U.S. data provided mixed signals about inflation.

With the Consumer price index (CPI) and producer price (PPI) data in hand, economists estimated that the core Personal Consumption Expenditures Price Index (PCE) price index rose 0.3% in January after gaining 0.2% in December, much lower than the 0.5% gain some had forecast following the CPI data.

Markets monitor prospects for a peace deal in Ukraine, which could boost the euro area's economy, while taking comfort that U.S. reciprocal tariffs were not immediately imposed.

Traders priced in 33 of Federal Reserve rate cuts from 32 late Thursday and 26 bps on Wednesday after U.S. data. IRPR

Germany's 10-year bond yield DE10YT=RR, the euro area's benchmark, was flat at 2.42% and on track to record a 4.5 basis points (bps) weekly rise.

Money markets priced in a European Central Bank deposit facility rate at 1.94% in December EURESTECBM7X8=ICAP from 1.85% on Monday.

Germany's 2-year yield DE2YT=RR, more sensitive to expectations for ECB policy rates, was unchanged at 2.09%.

Italy's 10-year yield IT10YT=RR was down one basis point (bp) at 3.49%. The yield gap between Italian and German yields DE10IT10=RR was at 106 bps.