Feb 3 (Reuters) - Euro zone government bond yields rose

on Tuesday, taking the lead from U.S. Treasuries as markets

assessed how Kevin Warsh, tapped to be the next Federal Reserve

chair, could shape the Fed's policy trajectory.

Warsh, ‌President Donald Trump's nominee to be Fed chair, has

called on the central bank ​to lower rates, highlighting stronger

productivity growth from AI. But he ‍has also called for a

smaller balance sheet, a ⁠combination analysts ⁠say points to a

steeper yield curve.

Germany's 10-year government bond yield, the

euro area's benchmark, rose ‌one basis point (bp) to 2.88%. ​It

reached 2.94% in March last year when Germany announced plans to

massively increase fiscal spending.

U.S. Treasury yields rose ⁠in early London trade with ‍the

10-year up ​one bp at 4.28%, after rising on Monday as traders

considered Warsh's potential impact on monetary policy.

German two-year government bond ‍yields recorded in January

their largest monthly drop since last April, driven lower by

investors betting the European Central Bank will factor in the

deflationary drag from a stronger euro as it considers monetary

policy.

They two-year yields were flat at 2.09%.

Money markets priced in ​around ‍a 200% chance of an ECB rate

cut in September, and indicated a 30%

probability of a rate hike in ​April 2027.

The euro was at 1.18 against the greenback after hitting a

five-year high at 1.20 last week after U.S. President Donald

Trump said the value of the dollar was "great", when asked

whether he thought it had declined too much.

France's 10-year government bond yields were

roughly unchanged. The gap versus ​Bunds was at 56 bps, after

tightening to 53.50 in mid-January, its lowest level since

August 2008.

Italy's 10-year yields rose 0.5 bps to 3.50%.

The gap versus Bunds ‍was at 60 bps.