Euro zone government bond yields edge up before economic data

By Stefano Rebaudo

Oct 24 (Reuters) - Euro zone government bond yields slightly extended their previous day's rise on Friday, as investors remained cautious ahead of key economic data from both the euro area and the U.S. later in the session.

Purchasing Managers’ Index readings from France, Germany and the wider euro area are due Friday morning, while the U.S. Bureau of Labor Statistics is set to release its inflation report later in the session.

Germany’s 10-year Bund yields were up 0.5 basis points (bps) at 2.58%.

Borrowing costs on both sides of the Atlantic rose on Thursday after U.S. sanctions on Russia prompted a jump in oil prices stoking inflation concerns.

Benchmark U.S. Treaury 10-year yields US10YT=RR rose one bp to 4.0% in early London trade, after rising 3.5 bps the day before.

Money markets priced in a 60% chance of a 25-basis-point ECB rate cut by July EURESTECBM7X8=ICAP. The key rate is seen at 1.84% in December 2026 EURESTECBM10X11=ICAP from the current 2%.

Germany’s 2-year yields DE2YT=RR, more sensitive to expectations for ECB policy rate outlook, rose 0.5 bps to 1.94%.

The yield gap between safe-haven Bunds and 10-year French government bonds DE10FR10=RR — a market gauge of the risk premium investors demand to hold French debt — was at 79.50.

It hit 87.96 bps earlier this month, the highest level since January 13, on concerns about the French fiscal outlook but fell to below 75 bps after Prime Minister Sebastien Lecornu survived two no-confidence votes in parliament last week.