June 21 (Reuters) - Euro zone government bond yields edged down ahead of French, German and euro area PMI data on Friday, with the French debt risk premium not far from its highest levels since 2017.
Bund yields were on track for a weekly rise as hopes that France's National Rally will backtrack on fiscally expensive pledges, avoiding the risks of a budget crisis at the heart of Europe, stopped last week’s rush into safe-haven assets.
Germany's 10-year bond yield, the benchmark for the euro area, fell 2 basis points (bps) to 2.41% and was set to end the week up 6 bps.
The gap between French and German 10-year yields , a gauge of the risk premium investors demand to hold French government bonds, was at 72.5 bps. It hit 82.34 bps last Friday, its highest level since February 2017.
Italy's 10-year yield was down one bp at 3.93%, with the Italian-German yield gap at 152 bps.
Germany's two-year bond yield, which is more sensitive to European Central Bank rate expectations, dropped 0.5 to 2.82%.
Money markets priced in a cumulative 65 bps of European Central Bank rate cuts in 2024, implying a further 25 bps move and a 60% chance of a third cut in 2024. They also discount 47 bps from the Fed this year.
(Reporting by Stefano Rebaudo; editing by Sonali Paul)
