May 13 (Reuters) - Euro zone government bond yields edged lower on Monday as investors priced in about 70 basis points of European Central Bank rate cuts in 2024 ahead of U.S. data that could affect expectations for the Federal Reserve policy path.
The U.S. Producer Price Index (PPI) will be released on Tuesday; the Consumer Price Index (CPI) and the retail sales figures on Wednesday.
Germany’s 10-year government bond yields, the bloc’s benchmark, dropped 2 bps to 2.50%.
Money markets priced in 68 basis points (bps) of ECB rate cuts in 2024 from 67 bps late Friday, and 42 bps for the Fed.
Italy's 10-year yield fell 2 bps to 3.83%, while the yield gap between Italian and German bonds - a gauge of the risk premium investors seek to hold bonds of the euro area's most indebted countries - dropped 1.5 bps to 132 bps.
Germany's 2-year yield, more sensitive to policy rate expectations, was down 1.5 bps at 2.95%.
The spread between U.S. 10-year Treasuries and German bunds - a gauge of the expected policy path divergence between the ECB and the Fed - tightened slightly to 198 bps.
(Reporting by Stefano Rebaudo, editing by Gerry Doyle)
