May 7 (Reuters) - Euro zone government bond yields were

steady on Wednesday, with focus fixed on a U.S. Federal Reserve

rate decision later in the day and a Bank of England meeting on

Thursday.

In early trade, Germany's 10-year bond yield, the euro

area's benchmark, was up just 1 basis points at around 2.54%

, down from three-week highs touched on Tuesday.

German politics was in focus a day after German conservative

leader Friedrich Merz was elected chancellor by parliament in a

second round of voting after an unprecedented defeat on a first

attempt got his coalition government off to a wobbly start.

The bigger draw for bond markets however was the Fed rate

decision which comes against a backdrop of concern about the

outlook for the U.S. economy given heightened trade uncertainty.

The Fed is expected to leave rates on hold but cut later

this year.

The Bank of England, the Riksbank and Norges Bank meet on

Thursday.

Italy's 10-year yield was also up 1 basis point

at 3.64%, leaving the spread between it and Germany's Bund yield

at 108 basis points.