Euro zone bond yields stable ahead of Fed policy meeting

May 7 (Reuters) - Euro zone government bond yields were steady on Wednesday, with focus fixed on a U.S. Federal Reserve rate decision later in the day and a Bank of England meeting on Thursday.

In early trade, Germany's 10-year bond yield, the euro area's benchmark, was up just 1 basis points at around 2.54% DE10YT=RR, down from three-week highs touched on Tuesday.

German politics was in focus a day after German conservative leader Friedrich Merz was elected chancellor by parliament in a second round of voting after an unprecedented defeat on a first attempt got his coalition government off to a wobbly start.

The bigger draw for bond markets however was the Fed rate decision which comes against a backdrop of concern about the outlook for the U.S. economy given heightened trade uncertainty.

The Fed is expected to leave rates on hold but cut later this year 0#USDIRPR.

The Bank of England, the Riksbank and Norges Bank meet on Thursday.

Italy's 10-year yield IT10YT=RR was also up 1 basis point at 3.64%, leaving the spread between it and Germany's Bund yield at 108 basis points. DE10IT10=RR