Sept 30 (Reuters) - Euro zone government bond yields

rose on Monday after economic data led investors to slightly

scale back their bets on future European Central Bank monetary

easing moves.

Inflation eased across a raft of key German states in

September, preliminary data showed on Monday.

Germany will release national data later in the session, a

day before euro zone figures.

Data showed the Italy consumer price increase slowed to 0.8%

year-on-year in September.

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

the euro zone bloc, rose 3.5 basis points (bps) to 2.17%; it was

down 0.5 bps before the German figures.

"The German data suggest that any decline in services

inflation, which the ECB has been paying particular attention

to, could be small and mainly driven by the reversal of the

boost from the Paris Olympics," said Franziska Palmas, senior

Europe economist at Capital Economics.

Palmas reckoned that the German state data and figures for

France and Spain suggest that euro-zone headline inflation will

drop to 1.7% from 2.2%.

Data showed on Friday that French and Spanish consumer

prices rose less than anticipated in September, leading

investors to increase their bets on future ECB rate cuts.

Figures from the euro area are due on Tuesday.

Markets priced in 49 bps of rate cuts by the European

Central Bank by year-end from around 53 bps

before data.

"With no significant dovish signals from data, markets are

inclined to slightly reduce their bets on future ECB rate cuts

after recent big moves," said Massimiliano Maxia, fixed income

specialist at Allianz Global Investors.

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

to ECB rate expectations, was up 3.5 bps at 2.12%. It hit 2.046%

earlier in the session, its lowest level since December 2022.

The gap between Austrian and German 10-year yields

- a gauge of the risk premium investors demand to

hold Austria's government bonds - was roughly unchanged at 49

bps after the far-right won the parliamentary elections.

The Eurosceptic, Russia-friendly Freedom Party (FPO) gained

28.8% of the vote, but leaders of Austrian political parties

united to reject the idea of forming a coalition with FPO.

The gap between French and German 10-year yields

was at 79 bps. It reached its widest since 2012,

beyond 85 bps during France's parliamentary elections.

France's new Prime Minister Michel Barnier is considering a

temporary increase in corporate tax as part of efforts to plug a

gaping hole in public finances, Le Monde newspaper reported.

Italy's 10-year yield rose 5 bps to 3.51%, and

the gap between Italian and German yields widened

to 133 bps.

(Reporting by Stefano Rebaudo; Editing by Muralikumar

Anantharaman)