July 29 (Reuters) - Euro zone government bond yields

edged higher on Tuesday as investors turned their focus to

upcoming policy meetings by the Federal Reserve and the Bank of

Japan, alongside a slate of key economic data from both the U.S.

and the euro area.

Data from Job Openings and Labor Turnover Survey (JOLTS)

will be released later in the session.

Euro area borrowing costs fell on Monday as markets pushed

back bets on a 25-basis-point rate cut to March 2026, with

economists warning that investors may be overstating the

European Central Bank's hawkish message at last week's meeting.

Sovereign bond markets showed quite a muted reaction to the

trade deal between the U.S. and the European Union.

Markets are pricing a 68% chance of an ECB rate cut

by December - with a depo rate seen at

1.83% from the current 2% - and a 90% probability of the same

move in March 2026.

They had priced a deposit rate at 1.73% in December early

last week, before the ECB meeting and before a U.S.-Japan trade

deal helped ease recession fears tied to a possible trade war.

Germany's 10-year government bond yield, the

euro area's benchmark, was up 0.5 bps at 2.69%.

German 2-year government bond yields - more

sensitive to expectations for European Central Bank policy rates

- were unchanged at 1.90%.

Italy's 10-year government bond yields were up

0.5 bps at 3.54%, with the spread between BTP and Bund yields -

a market gauge of the risk premium investors demand to hold

Italian debt - at 84 bps. It hit 82.30 bps last week, its lowest

level since April 2010.