LONDON  - Euro zone government bonds held onto their gains on Wednesday, while investors grow increasingly twitchy over upcoming U.S. jobs data this week, which has reignited widespread volatility and driven capital flows into traditional safe-haven assets.

Global markets have been wracked by risk aversion so far this week, partly down to nerves over Friday's U.S. employment report that could prove instrumental in determining the size of any interest-rate cut by the Federal Reserve this month.

But investors are starting to worry about the state of the economy and how that ties in with September typically being the worst month for equity-market returns.

Bund yields posted their largest one-day fall in a month on Tuesday, with a drop of 6 bps, while two-year yields fell by a more modest 3.8 bps.

The European Central Bank, which meets next week, is expected to deliver another quarter-point rate cut. Board member Piero Cipolollone told a French newspaper on Wednesday the central bank had room to lower rates and was at risk of becoming too restrictive.

* Benchmark 10-year Bund yields were mostly steady in early trading at 2.279%, while two-year yields were down 2 bps at 2.361%.

* Germany will hold an auction of 15-year Federal bonds on Wednesday.

* Italian 10-year yields were down nearly 1 bp at 3.663%, leaving their premium over Bunds 2.15 bps narrower at 137.7 bps.

* French 10-year OATs were flat around 3.0%.

(Reporting by Amanda Cooper; Editing by Kim Coghill)