Dec 12 (Reuters) - Euro zone government bond yields

rose, with investors on hold ahead of Thursday's European

Central Bank policy meeting, which is expected to deliver a

25-basis-point rate cut and some dovish guidance.

Analysts said the ECB could remove the reference to the need

to keep policy rates "sufficiently restrictive" in its

statement, and President Christine Lagarde might suggest

inflation was broadly on track to fall to target.

Germany's 10-year bond yield, the benchmark for

the euro zone bloc, rose 2 basis points (bps) to 2.15%.

Money markets fully priced in a 25-bps ECB rate cut, no

chance of a 50-bps move and a depo rate at

1.85% in July 2025.

Analysts argued that the ECB is expected to retain a

data-dependent approach in setting rates, given the heightened

uncertainty associated with geopolitical developments and the

outcome of the U.S. presidential election.

"A dovish stance this meeting would probably allow the

market to further undershoot this level (of the terminal rate

seen at 1.75%) if the outlook were to worsen, sensing that the

ECB could be even more inclined to supporting growth," ING

strategists led by Padraig Garvey said in a note.

ING said it did not entirely rule out a 50 bps cut.

Germany's two-year bond yield, more sensitive to

policy rate expectations, was down 0.5 bps at 1.96%.

The Swiss National Bank cut its interest rate by 50 basis

points on Thursday, its biggest reduction in almost 10 years.

Italy's 10-year yield rose 4.5 bps to 3.24%

after hitting a fresh 28-month low of 3.162% the day before.

The spread between Italian and German borrowing costs

- a gauge of the risk premium investors demand to

hold Italian debt - widened 3 bps to 109 bps. It hit 104.50 bps

earlier this week, its lowest since Oct. 2021.

The yield gap between French government bonds and safe-haven

German Bunds stalled at 76 bps.

Investors were also looking ahead to next week's Federal

Reserve meeting after U.S. data showed on Wednesday that

progress towards the Fed's inflation goal has stalled.

The hawks "are probably set to argue that the Fed's previous

rate cuts and an outlook of more rate cuts in the dots are

mistakes, especially in view of the coming uncertainty about the

inflationary implications of the coming Trump administration's

policies," Thierry Wizman, global forex and rates strategist at

Macquarie, said.