(Updates at 0920 GMT)

By Harry Robertson and Yoruk Bahceli

LONDON, July 4 (Reuters) - Euro zone bond yields edged

higher on Thursday after dropping the previous day, as a French

government bond sale passed with little trouble before the final

round of the country's parliamentary elections on Sunday.

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

the euro zone bloc, rose 2 basis points (bps) to 2.578%. Yields

move inversely to prices.

France attracted demand worth 2.59 times the amount

raised across

four bond sales

, slightly higher than its last long-dated auction before

President Emmanuel Macron called a snap election in early June

and in line with other auctions this year.

It raised 10.5 billion euros ($11.34 billion) in total,

the top amount it was targeting. France has reduced the amount

it is trying to auction during the election period.

The country's 10-year bond yield showed

little reaction and was up 2.5 bps at 3.271% after falling 6 bps

the previous day.

"It seems like investors have made out the most from the

elections-related cheapening to buy this auction," said Evelyne

Gomez-Liechti, multi-asset strategist at Mizuho. "Especially

with the two tail risks - far-left and far-right absolute

majorities - now seemingly off the table."

The gap between French and German borrowing costs has

narrowed 70 bps. The so-called spread, a gauge of

French risk, spiked to its highest since 2012 at 85 bps last

week as fears of a far-right election victory rose.

"Spreads have been tightening and sentiment has been a

bit more positive," said Jussi Hiljanen, head of rates strategy

at lender SEB.

Euro zone bond yields

fell across the board on Wednesday after weak U.S. economic

data bolstered expectations for rate cuts from the Federal

Reserve this year. Investors typically think weaker U.S. data

makes it easier for the European Central Bank to lower borrowing

costs further.

"The recent U.S. data has been supporting the idea the

economy has been showing signs of cooling down, which would then

open up for Fed rate cuts in the autumn," Hiljanen said.

U.S. markets are closed for the Fourth of July holiday and

there is little economic data.

Italy's 10-year yield was higher by 2.2 basis

points​ at 4.006%.

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

sensitive to European Central Bank rate expectations, was up 1.7

bps at 2.931%.

Also on traders' radars is monthly U.S. employment data and

the results of Thursday's British general election, both due on

Friday.

A hung parliament appears the most likely result in the

second round of French parliamentary elections, as left and

centrist groups strike deals to try to keep Marine Le Pen's

Rassemblement National from power.

($1 = 0.9261 euros)