Euro zone government bond yields rose, with investors on hold ahead of Thursday's European Central Bank policy meeting, which is expected to deliver a 25-basis-point rate cut and some dovish guidance.

Analysts said the ECB could remove the reference to the need to keep policy rates "sufficiently restrictive" in its statement, and President Christine Lagarde might suggest inflation was broadly on track to fall to target.

Germany's 10-year bond yield, the benchmark for the euro zone bloc, rose 2 basis points (bps) to 2.15%.

Money markets fully priced in a 25-bps ECB rate cut, no chance of a 50-bps move and a depo rate at 1.85% in July 2025.

Analysts argued that the ECB is expected to retain a data-dependent approach in setting rates, given the heightened uncertainty associated with geopolitical developments and the outcome of the U.S. presidential election.

"A dovish stance this meeting would probably allow the market to further undershoot this level (of the terminal rate seen at 1.75%) if the outlook were to worsen, sensing that the ECB could be even more inclined to supporting growth," ING strategists led by Padraig Garvey said in a note.

ING said it did not entirely rule out a 50 bps cut.

Germany's two-year bond yield, more sensitive to policy rate expectations, was down 0.5 bps at 1.96%.

The Swiss National Bank cut its interest rate by 50 basis points on Thursday, its biggest reduction in almost 10 years.

Italy's 10-year yield rose 4.5 bps to 3.24% after hitting a fresh 28-month low of 3.162% the day before.

The spread between Italian and German borrowing costs - a gauge of the risk premium investors demand to hold Italian debt - widened 3 bps to 109 bps. It hit 104.50 bps earlier this week, its lowest since Oct. 2021.

The yield gap between French government bonds and safe-haven German Bunds stalled at 76 bps.

Investors were also looking ahead to next week's Federal Reserve meeting after U.S. data showed on Wednesday that progress towards the Fed's inflation goal has stalled.

The hawks "are probably set to argue that the Fed's previous rate cuts and an outlook of more rate cuts in the dots are mistakes, especially in view of the coming uncertainty about the inflationary implications of the coming Trump administration's policies," Thierry Wizman, global forex and rates strategist at Macquarie, said.

(Reporting by Stefano Rebaudo, editing by Andrew Heavens)