Updates yields in late trading

By Joice Alves

LONDON, Oct 29 (Reuters) - Euro zone government bond yields steadied on Wednesday as investors awaited central bank policy updates, including a rate decision from the Federal Reserve later in the day, and a meeting between the U.S. and Chinese presidents on Thursday.

The U.S. Fed is widely expected to cut interest rates on Wednesday, 0#USDIRPR while both the European Central Bank and the Bank of Japan are expected to hold rates steady on Thursday.

Traders are also watching U.S. President Donald Trump's Asia trip for any signs of an improved relationship with China.

Trump said in a speech in South Korea, where he is scheduled to meet Chinese President Xi Jinping, that he thought they would get a "great deal" done for both sides.

Sources told Reuters that China's state-owned COFCO had bought three U.S. soybean cargoes this week in another sign of easing tensions between the world's two largest economies.

"Markets appear to be in a wait-and-watch mode with a busy calendar ahead. Focus is on the Fed and ECB meetings, the Trump-Xi summit and a host of earnings releases this week," said Mohit Kumar, chief strategist for Europe at Jefferies.

"For the Fed today, we expect a 25 basis point cut and an end to QT (Quantitative Tightening). (Fed Chair Jerome) Powell would not have a lot of data to back any strong conviction for the future outlook," Kumar added.

MICROSOFT, ALPHABET AND META TO REPORT EARNINGS

Testing markets' appetite for risky assets and the artificial-intelligence-fuelled stock rally, American technology companies Microsoft MSFT.O, Alphabet GOOGL.O and Meta META.O are due to report earnings later on Wednesday.

The German 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, was little changed late on Wednesday at 2.62%, having traded around this level for most of the day.

Italy's 10-year yield IT10YT=RR dipped 1.6 basis points to 3.386%.

Germany’s 2-year yields DE2YT=RR, which are more sensitive to expectations for ECB monetary policy, were also little changed at 1.98%.

The yield gap between safe-haven Bunds and 10-year French government bonds DE10FR10=RR — a market gauge of the risk premium investors demand to hold French debt — is also taking a breather, standing at 77.8 bps.

The spread hit 87.96 bps in early October, its widest since January, driven by investor concerns over France's fiscal trajectory.

(Reporting by Joice Alves and Amanda Cooper; Editing by Gareth Jones)

((Joice.Alves@thomsonreuters.com))