Aug 11 (Reuters) - Euro zone government bond yields

edged lower on Monday ahead of a week packed with event risk,

including a Ukraine summit between the United States and Russia

and a deadline on a U.S.-China trade truce, as liquidity

evaporates.

U.S. President Donald Trump and Russian President Vladimir

Putin will meet on Friday in Alaska to try to broker peace in

Ukraine, the first in-person meeting between a U.S. and Russian

leader since former President Joe Biden met Putin in 2021.

Meanwhile, a 90-day truce in the trade war between the U.S.

and China expires on Tuesday. Traders widely expect the pause to

be rolled over for another 90 days.

German 10-year yields were down one basis point

at 2.68%, having ended last week up 1 basis point. So far this

month, yields on Bunds, which serve as the benchmark for the

wider euro zone, have barely budged.

Two-year yields, which tend to be most reactive

to changes in expectations for interest rates, were down 0.5 bp

to 1.95%. They ended last week with a 5-bp rise, as investors

unwound bets on European Central Bank rate cuts.

Analysts argue that with the ECB's on-hold bias tempering

the impact of near-term developments, euro rates are

increasingly likely to take their directional cues from the

U.S., where data will be pivotal for Federal Reserve pricing.

Benchmark 10-year Treasury yields were down one

bp at 3.75%.

"Against the backdrop of continued trade rumblings and

geopolitical tensions, attention will be diverted by the release

of the U.S. CPI inflation data on August 12," said Jane Foley,

strategist at RaboBank.

"Signs of weakness in the U.S. labour market have boosted

expectations for a Fed rate cut in September, though these

forecasts are being clouded by the debate about whether the drop

in job applications is a function of slowing supply or weaker

demand on the back of Trump immigration policies," she added.

U.S. Treasury yields plummeted in early August as data

prompted investors to increase bets that the Fed will kick off a

new easing cycle next month.

Commerzbank noted euro zone bond supply this week was

expected to be the smallest so far this year, with just a

re-opening of German 10-year Bunds and Finnish 10- and 15-year

government debt.

Italy has cancelled auctions of 3-year, 7-year and

ultra-long debt, while Portugal will also stay put, strategists

at the bank said.

Elsewhere, 10-year Italian yields were down 1 bp

at 3.496%, while French 10-year yields were steady

at 3.388%.