Dec 19 (Reuters) - Euro zone long-dated government bond

yields jumped on Thursday, after the Federal Reserve cut

interest rates but signalled it would slow the pace of easing in

2025.

Germany's 10-year yield, the euro area's

benchmark, rose 7 basis points to 2.31%, after touching 2.322%,

its highest level since Nov. 22. It rose 1 bp on Wednesday.

Yields move inversely to prices.

The yield gap between U.S. 10-year Treasuries and German

Bunds narrowed slightly on Thursday to 224 bps,

after hitting 227 bps early in the session, after the surge in

U.S. Treasury yields.

Ten-year Treasury yields rose to their highest

since May. The yield was up 6 bps to 4.56%, after jumping more

than 11 bps the day before.

The divergence between euro zone and U.S. government bond

markets has been steadily widening since September, reflecting

different interest rate outlooks, as the Fed is cautious about

further rate cuts, while a lacklustre European economy pressures

on the European Central Bank to cut interest rates more.

The Fed cut interest rates by 25 bps as expected on

Wednesday, but Chair Jerome Powell said more reductions in

borrowing costs hinge on further progress in lowering inflation.

Powell said the decision to lower the policy rate to the

4.25%-4.50% range this time was a "closer call" than implied by

financial markets that considered the cut a near certainty ahead

of the meeting.

At the same time, markets are already eyeing the prospects

for sweeping economic changes under a Trump administration and

the impact that could have on inflation.

"A bit more hawkish Fed than anticipated, but still a lot up

in the air because there is still dependency on what exactly

Trump does," Lyn Graham-Taylor, a senior rates strategist at

Rabobank, said.

Money markets now price in just 34 bps in easing from the

Fed in 2025.

The Fed strongly influences the U.S. government bond market,

which sets the tone for borrowing costs around the world.

Italy's 10-year yield rose to its highest since

Nov. 26, and was last up 8 bps at 3.479%.

The gap between Italian and German bond yields

widened 3.5 basis points to 117 bps.

Germany's two-year bond yield, sensitive to

European Central Bank rate expectations, rose 2 bps to 2.06%.

Earlier on Thursday, the Bank of Japan and the Bank of

England held interest rates steady.