Euro zone bond yields steady before Ukraine talks, Jackson Hole

By Samuel Indyk

LONDON, Aug 18 (Reuters) - Euro zone bond yields were steady on Monday after rising last week as investors scaled back bets of a jumbo rate cut from the Federal Reserve, with eyes now on Washington where Ukraine's Volodymyr Zelenskiy and European leaders will meet Donald Trump.

The meeting later on Monday will discuss next steps following U.S. President Trump's meeting last week with Russian President Vladimir Putin, though actual proposals remain vague.

Analysts have said an agreement to end the war could support risk appetite and weigh on safe-haven German government bonds.

Germany's 10-year Bund yield, the benchmark for the euro area, was little changed at 2.779%.

Germany's two-year yield, which is sensitive to changes in interest rate expectations, was up 1 basis point at 1.979%. Bond yields move inversely to prices.

The other main focus this week will be the Fed's Jackson Hole Symposium where Chair Jerome Powell is due to speak.

Markets scaled back their bets for a 50 basis point U.S. rate cut next month after inflation data showed signs of underlying price pressures.

Markets are pricing around an 85% chance of a 25 bp Fed rate cut next month. Before last week's inflation data, investors had fully priced that cut as well as a slight chance of a 50 bp reduction.

Interest rate expectations for the European Central Bank remain anchored after policymakers decided to keep the deposit rate unchanged at July's meeting. Markets are pricing in 11 basis points of easing by year end, implying about a 45% chance of another rate cut.

Germany's 30-year yield was little changed after earlier edging up to a 14-year high of 3.356%.

France's 30-year bond yield also recently hit its highest since 2011, while the U.S. 30-year yield is back above 4.3%.

"The headwinds follow several signs of weak demand recently, and investors are now preparing for this week's fresh supply from Germany," said Frederik Romedahl, chief analyst at Danske Bank.

Germany is set to sell two 30-year bonds this week, as auction volume picks up after last week recording its lowest weekly volume of the year. (Reporting by Samuel Indyk; Editing by Kirsten Donovan)