May 25 (Reuters) - Euro zone government bond yields fell

on Monday as renewed hopes of a U.S.-Iran deal to reopen the

Strait of Hormuz eased concerns over inflation and reduced

expectations of aggressive central bank rate rises.

Borrowing costs tracked moves in oil prices, which slid 5% to a

two-week low as hopes for a peace deal lifted sentiment, even as

key sticking points remained unresolved.

The United States will either have a good agreement with Iran,

or deal with the country "another way," Secretary of State Marco

Rubio said on Monday.

Money markets priced in a European Central Bank depo rate at

2.57% in December from 2.65% late Friday, from the current 2%.

They indicated an 70% chance of a first

rise next month from 80%.

Germany's 2-year yields, which are more sensitive to

expectations for policy rates, fell 6.5 basis points (bps) to

2.5758%, their lowest level since May 8. They reached 2.771% in

late March, the highest since July 2024.