Euro zone government bond yields edge up, await US data

Feb 19 (Reuters) - Euro zone benchmark Bund yields edged up on Thursday, echoing moves in U.S. Treasuries, while markets indicated an about 35% chance of ?a European Central Bank rate cut in ?2026.

Traders now see a higher probability of a rate cut ?by December 2026, compared with 20% last week, though expectations have ?eased from more than 40% on ?Tuesday.

Fixed-income markets ?are expected to stay in wait-and-see mode ahead of a heavy slate ?of U.S. data due ?on Friday.

Euro area economic data offered some weak signals, including a European Union trade surplus ?shrinking further as tariffs weighed ?and ?rising Chinese imports crowded out domestic production, and German investor morale unexpectedly falling in February.

Germany's 10-year government bond ?yield, the euro area's benchmark, rose 1.5 basis ?points (bps) to 2.76%. It reached 2.725% on Tuesday, its lowest level since December 1, and was around 2.90% early this month.

U.S. Treasury yields rose in early London ?trade, ?with benchmark 10-year up 2.5 bps at ?4.10%, after climbing the day before as solid economic ?data reinforced expectations the Federal Reserve will keep rates on hold. It reached 4.018% on Tuesday, its lowest since November 28.

Germany's 2-year yields, more sensitive to expectations for policy rates, were up one bp at 2.06%.

Italy's 10-year government bond yields ?rose 2 bps to 3.37%. The gap versus Bunds was at 59.60 bps, after falling to 53.50 in ?mid-January, its lowest level ?since August 2008. (reporting by Stefano Rebaudo; Editing ?by David Holmes)