Euro zone government bond yields edge up, taking cues from US Treasuries

May 19 (Reuters) - Euro zone government bond yields edged up on Monday, taking cues from U.S. Treasuries as a Moody's downgrade of the U.S. credit rating underlined concerns about future fiscal policies.

Germany's 10-year yield DE10YT=RR, the euro area's benchmark, rose one basis point (bp) to 2.59%. It hit 2.70% last week, its highest level since April 10.

U.S. Treasury yields rose in early London trade – with the 10-year US10YT=RR up 8.5 bps at 4.52% -- after dropping 1.5 bps on Friday.

Money markets priced in the European Central Bank deposit facility rate to be at 1.75% by year-end EURESTECBM5X6=ICAP.

German 2-year yields DE2YT=RR, more sensitive to ECB policy rates, was up 0.5 bps at 1.94%.

Italy's 10-year yield rose 2.5 bps to 3.63% IT10YT=RR. The spread between Italian and German yields – a market gauge of the risk premium investors demand to hold Italian debt – was at 97 bps DE10IT10=RR, after reaching its lowest since April 2021 at around 94 bps last week.