Euro zone bond yields slightly higher before Fed minutes

*

German 10-year bond yield rises ahead of Fed minutes

*

Fed's December meeting showed disagreement on policy path

*

ECB not expected to change rates soon

By Samuel Indyk

LONDON, Dec 30 (Reuters) - Germany's 10-year government bond yield was slightly higher on Tuesday ahead ?of the release of the minutes from the Federal Reserve's December meeting, having dropped to a ?three-week low the day before in holiday-thinned trading.

Germany's benchmark 10-year Bund yield ?was up just over 1 basis point at 2.84%. ?It fell to ?2.824% on Monday, its lowest since December 8, after rising to a nine-month high of ?2.917% last week.

Most 10-year bond yields ?across the region were also rising slightly after a drop on Monday .

Attention on Tuesday was set to fall on ?the minutes from the Federal Reserve's ?December policy ?meeting.

At that meeting, the Fed lowered the target range for the Fed funds rate by a quarter-point to 3.5%-3.75%, although two policymakers ?dissented, preferring no change to interest rates.

"We expect the minutes to the December meeting to note ongoing disagreement among FOMC participants about the appropriate policy path over the near term," Goldman Sachs economists said in a note.

Markets are pricing in just 4 basis points of ?easing ?at the Fed's January meeting, implying around a 15% chance of a rate cut. The next rate cut is not fully ?priced until June.

In contrast to the Fed, markets are not pricing in any policy action from the European Central Bank at all in 2026.

Influential ECB rate-setter Isabel Schnabel said last week that she expects no interest rate hike in the foreseeable future. Earlier in the month, Schnabel had said she expected ?the next move from the ECB to be a hike, pushing up borrowing costs across the region.

Germany's two-year yield, which is sensitive to changes in ECB policy expectations, was little ?changed on Tuesday at 2.12%. (Reporting by Samuel Indyk; Editing by Jan Harvey)