Euro zone government bond yields edge up before US data

By Stefano Rebaudo

Nov 3 (Reuters) - Euro zone government bond yields rose on Monday, after a two-week climb, as investors awaited U.S. data and tracked trade developments following a fragile truce between the U.S. and China.

Euro area borrowing costs recorded two straight weekly rises on Friday after signs of a hawkish tilt from the Federal Reserve and the European Central Bank's uneventful policy meeting.

Data from the U.S. manufacturing ISM, due later in the session, will receive more attention during the shutdown.

Germany's 10-year yields, the euro area's benchmark, were up 0.5 basis points (bps) at 2.64%. They hit 2.661% last week, the highest since October 10.

Money markets priced in about a 50% chance of a 25-basis-point ECB rate cut by September 2026. The key rate is seen at 1.90% in December 2026 from the current 2%.

Germany's 2-year yields, more sensitive to expectations for ECB policy rate outlook, were roughly unchanged at 1.99%.

The yield gap between safe-haven Bunds and 10-year French government bonds - a market gauge of the risk premium investors demand to hold French debt - was at 78.50. The spread hit 87.96 bps in early October, its widest since January, driven by investor concerns over France's fiscal trajectory.

French lawmakers on Friday shot down proposals to levy a wealth tax on the ultra-rich, demanded by the left, during the debate over Prime Minister Sebastien Lecornu's belt-tightening budget.

(Reporting by Stefano Rebaudo; editing by Ros Russell)