Euro zone yields steady before ECB, BoE policy meetings

Dec 18 (Reuters) - Euro zone government bond yields were steady on Thursday, with investors bracing for the European Central Bank to reaffirm its higher-for-longer rate stance later in the day.

Investors pared back bets on future ECB rate hikes earlier this week as the impact of recent remarks by ECB board member Isabel Schnabel faded.

The Bank of England will also be in focus on Thursday, while the Bank of Japan will announce its decisions on Friday.

Germany's 10-year yields, the euro area's benchmark, were down 0.5 basis points (bps) at 2.86%. They hit 2.894% last week, their highest level since mid-March.

Money markets priced in an around 12% probability of a tightening move by December 2026 and a 35% chance by March 2027, down from over 50% last week. The ECB depo rate is currently at 2%.

German 30-year yields were up 0.5 bps at 3.49%, after hitting 3.498% last week, their highest level since July 2011, as long-dated debt came under pressure on expectations for heavier bond supply.

Yields on German 2-year Schatz fell 0.5 bps to 2.14%.

Italy's 10-year government bond yields dropped one bp to 3.52%, with the gap versus Bunds hitting a fresh 16-year low at 64.40 bps.

(Reporting by Stefano Rebaudo; Editing by Ros Russell)