LONDON, June 5 (Reuters) - Germany's 10-year government bond yield was steady on Wednesday after its sharpest two-day drop since March following weak U.S. and European data, with focus now set to turn to the European Central Bank's policy announcement on Thursday.
The ECB is widely expected to lower interest rates from a record high, but there remains uncertainty about the future path for rates.
Money market traders are pricing around 63 basis points (bps) of cuts this year, implying two quarter-point moves and around a 50% chance of a third cut.
Germany's 10-year bond yield, the benchmark for the euro zone bloc, was little changed at 2.54%. It fell 11 bps in the prior two days, its biggest two-day fall since March 22.
Italy's 10-year yield was higher by 1 bp at 3.88%, and the gap between Italian and German bunds stood at 132 bps.
Germany's two-year bond yield, which is more sensitive to European Central Bank rate expectations, was little changed at 3%. (Reporting by Samuel Indyk; Editing by Andrew Heavens)
