Euro zone bond yields slip before Ukraine talks, Jackson Hole

By Samuel Indyk and Lucy Raitano

LONDON, Aug 18 (Reuters) - Euro zone bond yields slipped on Monday after rising last week as investors scaled back bets of a jumbo rate cut from the Federal Reserve, with eyes now on Washington where Ukraine's Volodymyr Zelenskiy and European leaders will meet U.S. President Donald Trump.

Germany's 10-year Bund yield DE10YT=RR, the benchmark for the euro area, was down 2.3 bps at 2.7569%.

The country's two-year yield DE2YT=RR, which is sensitive to changes in interest rate expectations, was unchanged at 1.967%. Bond yields move inversely to prices.

The meeting later on Monday will discuss next steps following Trump's summit last week with Russian President Vladimir Putin, though actual proposals remain vague.

Analysts have said an agreement to end the war could support risk appetite and weigh on safe-haven German government bonds.

Mizuho multi-asset strategist Evelyne Gomez-Liechti pointed to Friday's strong bear steepening - where long-dated German bond yields rose more than short-dated ones - to explain Monday's market moves in otherwise illiquid summer trading.

"Market sentiment is that there's going to be a lot of steepening pressures in September, because we have issuance coming back...and also the Dutch pension reform in the background," she said.

"(Friday's move) was a bit of investors trying to get ahead of the steepening, trying to catch it ahead of September," said Gomez-Liechti.

The other main focus this week will be the Fed's Jackson Hole Symposium where Chair Jerome Powell is due to speak.

Markets scaled back their bets for a 50 basis point U.S. rate cut next month after inflation data showed signs of underlying price pressures.

Markets are pricing around an 85% chance of a 25 bp Fed rate cut next month. Before last week's inflation data, investors had fully priced that cut as well as a slight chance of a 50 bp reduction.

Interest rate expectations for the European Central Bank remain anchored after policymakers decided to keep the deposit rate unchanged at July's meeting. Markets are pricing in 11 basis points of easing by year end, implying about a 45% chance of another rate cut.

Germany's 30-year yield DE30YT=RR fell 2.5 bps after earlier edging up to a 14-year high of 3.356%.

France's 30-year bond yield FR30YT=RR also recently hit its highest since 2011, while the U.S. 30-year yield US30YT=RR is back above 4.3%.

"The headwinds follow several signs of weak demand recently, and investors are now preparing for this week's fresh supply from Germany," said Frederik Romedahl, chief analyst at Danske Bank.

Germany is set to sell two 30-year bonds this week, as auction volume picks up after last week recording its lowest weekly volume of the year.

Elsewhere, long-dated Italian government bond yields IT10YT=RR were down 3.5 bps at 2.7547% while 2-year Italian bond yields were down 2.4 bps IT2YT=RR at 2.2198%.