(Updates after ECB decision)

By Stefano Rebaudo and Samuel Indyk

June 6 (Reuters) - Euro zone government bond yields rose

on Thursday after the European Central Bank lowered borrowing

costs from a record high but kept the timing of the next move

under wraps.

Analysts have been expectant for weeks that a rate cut this

month was a done deal, but there is a lot of uncertainty about

the outlook after June.

"The Governing Council will continue to follow a

data-dependent and meeting-by-meeting approach to determining

the appropriate level and duration of restriction," the ECB said

in a statement.

The central bank also upped some of its growth and inflation

forecasts, predicting a somewhat later return of price growth to

its 2% target.

Germany's 10-year yield, the bloc's benchmark,

rose 6 basis points (bps) to 2.56%. It hit a 6-1/2 month high at

2.707% last Friday.

"The statement arguably gave less guidance than might have

been expected on what comes next," said Mark Wall, chief

European economist at Deutsche Bank.

"In that sense, the immediate tone is a "hawkish cut". This

is not a central bank in a rush to ease policy."

Markets have trimmed bets on future easing from the ECB and

now price around 35 bps of rate cuts by the end of the year on

top of today's move, implying one more rate cut and around a 40%

chance of a third move by the end of the year.

Germany's 2-year government bond yield, which is

sensitive to policy rate expectations, was up 5 bps at 3.025%.

It hit 3.125% on Friday, its highest since mid-November.

Italy's 10-year yield rose 7 bps to 3.878%,

while the gap between Italian and German yields, a

gauge of the risk premium investors seek to hold bonds of the

euro area's most indebted countries, was at 131 bps.

The spread between U.S. and German 10-year yields

- a gauge of expectations for monetary policy

divergence between the Fed and the ECB - narrowed to 174 bps

from around 177 bps before the decision.

The ECB is the second major central bank to cut rates in two

days after the Bank of Canada trimmed its key policy rate on

Wednesday.