FRANKFURT, June 4 ― Euro zone government bond yields edged up today after falling sharply the day before as investors reduced their bets on future European Central Bank rate cuts ahead of this week's policy meeting.

Market participants take a monetary easing of 25 basis points for granted, but there is a lot of uncertainty about the rate outlook after June.

Money markets priced in 60 basis points of ECB rate cuts in 2024 ― from less than 55 bps early yesterday ― which imply two moves and an around 40 per cent chance of a third move by year-end.

Germany's 10-year yield, the bloc's benchmark, was flat at 2.58 per cent, after dropping 6.5 basis points (bps) the day before in its biggest daily fall since May 15.

Germany's two-year government bond yield, more sensitive to policy rate expectations, was up 0.5 bps at 3.04 per cent.

Italy's 10-year yield rose one bp to 3.90 per cent after falling 9 bps yesterday, its biggest daily drop since May 15.

The yield gap between Italian and German bonds, a gauge of the risk premium investors seek to hold bonds of the euro area's most indebted countries, was roughly unchanged at 131 bps.

The spread between US and German 10-year yields ― a gauge of expectations for monetary policy divergence between the Fed and the ECB ― widened to 182 bps. ― Reuters