Euro zone bond yields dip; focus on spending plans, ECB policy

LONDON, June 26 (Reuters) - Germany's 10-year bond yield fell on Thursday after rising the day before, but remained within its recent narrow range as markets weighed worries about rising fiscal spending against the outlook for monetary policy.

Germany's 10-year government bond yield DE10YT=RR, the euro zone's benchmark, was last down 2 basis points at 2.54%, after rising three bps the day before. The 30-year yield DE30YT=RR was down 1.5 bps at 3.05%.

Investor focus has been on the longer-end of the curve, with expectations that euro area countries, led by Germany, will ramp up borrowing to increase spending on defence.

On Wednesday, NATO leaders agreed to boost spending on defence to 5% of GDP, but some European nations, already running large deficits and seeing debt balloon, may struggle to meet the target.

Germany, which has greater scope to increase spending, published its draft budget for 2025 earlier this week, which included record investments to boost growth.

Germany's two-year yield DE2YT=RR, which is more sensitive to changes in monetary policy expectations, was down 1.5 bps at 1.831%.

The European Central Bank lowered its deposit rate earlier this month but signalled it was done with rate cuts for now after lowering borrowing costs eight times in just over a year.

The central bank's vice president Luis de Guindos and influential rate setter Isabel Schnabel are both scheduled to deliver speeches later on Thursday.

Italy's 10-year bond yield IT10YT=RR was down 2.5 bps at 3.484%, pushing the yield gap between Italian and German 10-year bonds DE10IT10=RR tighter by 1 bp to 93 bps.