May 19 (Reuters) - Euro zone government bond yields

edged up on Monday, taking cues from U.S. Treasuries as a

Moody's downgrade of the U.S. credit rating underlined concerns

about future fiscal policies.

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

benchmark, rose one basis point (bp) to 2.59%. It hit 2.70% last

week, its highest level since April 10.

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

10-year up 8.5 bps at 4.52% -- after dropping 1.5

bps on Friday.

Money markets priced in the European Central Bank deposit

facility rate to be at 1.75% by year-end.

German 2-year yields, more sensitive to ECB

policy rates, was up 0.5 bps at 1.94%.

Italy's 10-year yield rose 2.5 bps to 3.63%. The

spread between Italian and German yields - a market gauge of the

risk premium investors demand to hold Italian debt - was at 97

bps, after reaching its lowest since April 2021 at

around 94 bps last week.