Nov 13 (Reuters) - Bund yields edged higher on Thursday

after dropping slightly the day before as the European Central

Bank was firmly on hold and recent German economic data

increased uncertainty about the size and timing of a boost from

Germany's planned spending push.

They have been hovering near the levels last seen in

mid-January, before a March political deal in Germany to

increase spending on defence and infrastructure.

Germany's 10-year yields rose 0.5 basis points

(bps) to 2.65%. They were at 2.63% in mid-January.

The German Council of Economic Experts on Wednesday cut its

forecast for Europe's largest economy in 2026 and predicted only

modest growth this year.

Markets scaled back their bets on Fed policy rate cuts after

President Donald Trump on Wednesday signed legislation ending

the government shutdown.

They priced a 52% chance of a 25-bp easing move by year-end

from about 60% the day before and 82 bps of cuts by

end-2026 from 87 bps.

In the euro area, traders are still pricing in about a 40%

chance of a 25-basis-point European Central Bank rate cut by

September, and continue to expect the key rate

at 1.97% by March 2027, unchanged from previous levels, versus

the current 2%.

Germany's 2-year yields, more sensitive to

expectations for ECB policy rate outlook, were up 0.5 bps at

2.01%.

Euro area 2-year borrowing costs hovered just below levels

seen after the ECB's uneventful October 30 policy meeting, as

markets have priced in a "higher-for-longer" rate path since the

summer.

Italy's 10-year government bond yield rose 0.5

bps to 3.38%, while the gap over safe-haven German Bunds -- a

gauge of the extra return investors demand to hold Italian debt

instead of safe-haven German bonds - was at around 72 bps, its

tightest level since 2010.