Jan 8 (Reuters) - Euro zone government bond yields rose on Monday after money markets scaled back expectations for future policy rate cuts.

Data showed that German inflation rose in December due to base effects, temporarily stopping the downward trend seen in the last months, offering the European Central Bank (ECB) an argument for keeping rates steady for some time.

The bloc's borrowing costs and market expectations for policy rate reductions were now around levels seen in mid-December 2023, before a year-end bond rally in thin trading conditions. Bond prices move inversely to yields.

Germany's 10-year government bond yield, the benchmark for the euro area, rose 0.3 basis point (bps) to 2.15%.

It was around 2.14% in mid-December last year before hitting 1.896% on Dec. 28, its lowest level in 2023.

Money market pricing implies around 145 bps of cuts in the ECB deposit facility rate this year. Money market bets late last year had implied over 170 bps of cuts in 2024 and 168 bps early on Thursday, before falling to 140 bps right after Friday's strong U.S. jobs data.

Some analysts regard the recent money market pricing of the 2024 ECB policy path as overly ambitious.

Euro area data provided mixed signals about the economy.

Investor morale in the bloc improved for the third consecutive month in January. In Germany, industrial orders rose less than expected in November, while exports rose much more than forecast.

Markets will focus on U.S. consumer price data due on Thursday, which could provide further clues about the Federal Reserve monetary policy path.

Euro zone bond supply is also in focus, with a 150 billion euros ($164 billion) of government bond sales in January fuelling unease in the bloc's bond markets.

“One factor behind this pullback (in bond prices) could just be that the market wants a better clearing price (higher yields) to absorb the January issuance deluge,” Barclays analysts said in a note to clients.

“Recall that at the start of 2023, the situation was the exact opposite: yields had risen 70-80bp in December 2022 and ended the year at the highs.”

Investors reckon that the supply outlook for 2024 would be manageable, especially in the context of policy easing, but it could be a headwind to higher bond prices.

Barclays estimated net euro area government bond supply at 675 billion euros in 2024, the highest on record, but just 3.7% above the 2023 level of 650 billion. They see gross supply roughly unchanged versus 2023.

The 675 billion figure includes net euro area government bond supply and the impact of ECB quantitative tightening (QT) flows. Analysts expect net euro area government bond supply to decline from 2023 – to roughly 460 billion euros according to Barclays - while QT flows are set to increase despite a cautious runoff plan for the Pandemic Emergency Purchase Programme (PEPP), which involves 7.5 billion of bond sales per month in the second half of the year.

The ECB bond sales include the rundown of the Asset Purchase Programme (APP) bond portfolio.

($1 = 0.9152 euros)

(Reporting by Stefano Rebaudo, additional reporting Joice Alves, editing by Emelia Sithole-Matarise and Susan Fenton)