LONDON, June 5 (Reuters) - Germany's 10-year government

bond yield was steady on Wednesday after its sharpest two-day

drop since March following weak U.S. and European data, with

focus now set to turn to the European Central Bank's policy

announcement on Thursday.

The ECB is widely expected to lower interest rates from a

record high, but there remains uncertainty about the future path

for rates.

Money market traders are pricing around 63 basis points

(bps) of cuts this year, implying two quarter-point moves and

around a 50% chance of a third cut.

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

the euro zone bloc, was little changed at 2.54%. It fell 11 bps

in the prior two days, its biggest two-day fall since March 22.

Italy's 10-year yield was higher by 1 bp​ at

3.88%, and the gap between Italian and German bunds

stood at 132 bps.

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

sensitive to European Central Bank rate expectations, was little

changed at 3%.