(Updates at 0935 GMT)

By Harry Robertson

LONDON, Aug 22 (Reuters) - Euro zone bond yields edged

upwards on Thursday after survey data showed the bloc's private

sector fared better than expected in August, although a separate

measure of wage pressures eased.

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

the euro zone, was last up 2 basis points (bps) at 2.222%,

roughly where it has traded since recovering from a drop at the

start of August. Yields move inversely to prices.

Purchasing managers' index (PMI) survey data showed euro

zone business activity was surprisingly strong in August, with

services a bright spot.

Germany remained mired in a downturn, however;

its PMI

showed business activity contracted in August for a second

consecutive month and by more than expected.

Separate figures

showed growth in negotiated wages in the euro zone slowed

sharply to 3.55% year-on-year in the second quarter, down from a

record high of 4.74% in the first quarter.

"The PMI figures are overshadowing these wage numbers,"

said Jussi Hiljanen, head of European rates strategy, SEB. "The

service sector is still strong and service sector inflation is

one of the focal points of the ECB (European Central Bank)."

However, Hiljanen said he was surprised by the pick-up

in yields after the PMI data, which was skewed by the Olympics

in France.

Italy's 10-year yield was roughly flat at

3.572%, and the gap between Italian and German bond yields

fell 2 bps to 135 bps.

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

sensitive to ECB rate expectations, was up 1 bp at 2.376%.

Money market pricing showed traders on Thursday were

expecting 65 bps of further ECB rate cuts this year, little

changed from the day before.

Bond yields tumbled at the start of August after data showed

the U.S. unemployment rate unexpectedly rose in July, raising

concerns about the world's biggest economy.

They have since perked back up as data has suggested the

economy remains solid, although U.S. yields closed lower

overnight after the release of data showing jobs growth in the

country was weaker than previously thought. U.S. weekly jobless

claims data is due later on Thursday.