Sept 27 (Reuters) - Euro zone government bond yields

edged higher on Friday before inflation data from France, Spain

and the U.S., which could affect expectations for monetary

policy paths on both sides of the Atlantic.

Flash releases for France and Spain are due on Friday before

the German and euro area print next week.

Markets will also closely watch the U.S. Personal

Consumption Expenditure (PCE) figures later in the session.

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

the euro zone bloc, rose 0.5 basis points (bps) to 2.18%.

Markets priced in a 60% chance of a 25 bps rate cut by the

European Central Bank in October from

around 20% early this week.

Germany's two-year bond yield, which is sensitive

to ECB rate expectations, was up 2 bps at 2.3%. It hit 2.079% on

Thursday, its lowest level since December 2022.

The gap between French and German 10-year yields

- a gauge of risk premium that investors demand to

hold France's government bonds - was last at 78 bps, from around

70 bps two weeks ago. It reached its widest since 2012 beyond 85

bps during France's parliamentary elections.

Budget Minister Laurent Saint-Martin warned the deficit is

at risk of topping 6% of economic output, far above the 5.1% the

previous government had estimated in the spring.

Italy's 10-year yield was flat at 3.48% and the

gap between Italian and German yields tightened to

128 bps.