Jan 24 (Reuters) - Euro zone government bond yields

edged down on Friday as investors await Purchasing Managers

Index data later in the session, which could affect expectations

for the European Central Bank's policy path.

Benchmark German Bund yields were on track to end the week

roughly unchanged after showing a muted reaction to remarks on

tariffs by U.S. President Donald Trump while investors shifted

their focus to the ECB policy meeting next week.

Germany's 10-year bond yield was down one basis

point (bp) at 2.50%, and was set to record a 0.5 bps weekly

rise.

U.S. Treasury yields dropped, with the 10-year down 2 bps at

4.62% in early London trade.

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

rate expectations, fell one bp to 2.23%.

Money markets are pricing in an ECB deposit facility rate at

2.05% at the end of 2025, from the current

3%.

Italy's 10-year yield was flat at 3.64%.

The gap between Italian and German yields - a

gauge of the risk premium investors demand to hold Italian debt

- stood at 110 bps. It hit 104.5 bps in early December, its

tightest since October 2021.

The yield spread between French and German bonds

was 77 bps.