May 5 (Reuters) - Euro zone government bond yields edged

down on Monday with investors on the sidelines ahead of a week

packed with policy meetings at central banks including the

Federal Reserve and the Bank of England.

A public holiday in Britain contributed to thin trade

volumes.

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

benchmark, fell 0.5 basis points at 2.51%.

The benchmark yield rose around 5 basis points last week, a

more modest increase compared with the volatility of early March

when it jumped above 2.9% following Germany's dramatic spending

plans. Bund yields lost ground afterwards on concerns about the

adverse economic impact of U.S. tariffs.

"Bunds are unable to defy the U.S. headwinds, and the curve

is steepening as European Central Bank expectations for two more

rate cuts remain better anchored," Rainer Guntermann, rate

strategist at Commerzbank, said.

U.S. Treasury yields edged down - with the 10-year falling

0.5 bps to 4.31% - after rising to a one-week high on Friday as

data showed that employers added more jobs than economists had

expected in April,

"Downside in oil prices should help Bunds to stabilise today

after the sharp sell-off on Friday, but the long-end appears

vulnerable with 10y yields having broken above the 2.5% mark,"

Commerzbank's Rainer added.

Money markets priced in an ECB deposit facility rate at

1.64% after falling to below 1.55% in mid April after the ECB

suggested it was ready to cut rates in response to the potential

adverse impact of U.S. tariffs.

Crude prices fell more than 2% on Monday after OPEC+ decided

over the weekend to further speed up oil output hikes.

Most economists expect the U.S. central bank to keep rates

unchanged this week, but to ease its monetary policy in the near

future. Markets price in 115 bps of Fed rate cuts by June 2026.

"We think the most likely timing for the next (Fed) cut is

the following meeting in June, but do not anticipate Powell to

pre-commit at this stage," Antti Ilvonen, senior analyst U.S.

macro at Danske Bank, said.

"By June and July, the Fed will likely have much more

clarity on both the final level of China tariffs as well as the

future of the other reciprocal tariffs," he added.

Sweden's Riksbank and Norway's Norges Bank are also meeting

this week.

Optimism around a potential de-escalation of trade tensions

between the U.S. and China affected markets last week, with

investors shifting their focus to economic data.

Italy's 10-year yield was down one basis point at 3.62%

, leaving the spread between it and Germany's Bund

yield at 109.1 basis points.