LONDON, Feb 8 (Reuters) - More than 40 percent of the 7 trillion euro-denominated government bond market in Europe has yields below zero, data showed, a sign that markets are bracing for the European Central Bank to cut interest rates deeper into negative territory.

The data from trading platform Tradeweb showed roughly 2.9 trillion euros ($3.2 trillion) worth of sovereign bonds have a negative yield, suggesting investors are willing to pay for the privilege of lending to the most trusted borrowers.

That equates to around 41 percent of the market, which is a larger share than the 36 percent seen below zero last April when German 10-year yields hit a record low.

Yields on two-year bonds in Germany - the euro zone’s benchmark issuer - fell on Monday to a record low of minus 0.516 percent, which is more than 20 basis points (bps) below the ECB’s deposit rate of minus 0.30 percent.

Euro zone money markets fully price in a 10 bps cut in the deposit rate at the ECB’s March meeting to boost inflation, with a further 10 bps cut priced in by June.

Yields on bonds issued by some blue-chip firms in Europe have also dipped below zero.

Tradeweb data showed that about 48 billion euros worth of investment grade corporate bonds in Europe carry negative yields.

That is about 1.8 percent of a total market worth around 2.66 trillion euros.

The data is based on the market value of euro-denominated sovereign and corporate bonds in Europe, calculated using the mid-price at Thursday’s close. (Reporting by Dhara Ranasinghe; Editing by Gareth Jones)