Euro zone government bond yields were steady on Friday ahead of a German survey that is likely to show business morale improved slightly in Europe's largest economy after deteriorating for four consecutive months.

German 10-year bond yield, the benchmark for the euro zone bloc, was largely unchanged at 2.249% after easing for two straight sessions from a seven-week high.

A survey on Thursday showing euro zone business activity contracted again in October fuelled bets on bigger interest rate cuts from the European Central Bank and pushed yields lower as prices rose.

However, German Ifo institute's business climate index is expected to have improved slightly to 85.6 for October from 85.4 in the prior month, which fanned fears that Germany may have tipped into recession. The survey is due at 0800 GMT.

Traders are fully pricing a quarter-point cut from the ECB in December, with a 44% chance of a half-point move.

Germany's two-year bond yield, which is more sensitive to rate expectations, rose 2 bps to 2.118%.

Focus will also be on Moody's review of France's sovereign rating later in the day after the rating agency warned the outcome of France's election was a negative.

Earlier this month, rival agency Fitch cut France's outlook to "negative" from "stable" and kept its rating at AA-.

The spread between French and German 10-year yields - the premium investors demand to hold France's bonds - was last at 72.5 bps.

(Reporting by Medha Singh in Bengaluru Editing by Tomasz Janowski)