Euro zone bonds enjoy cooler US inflation, yields hit one-month lows

LONDON, May 16 (Reuters) - Euro zone bond yields hit one-month lows on Thursday as bonds around the world were helped by U.S. data a day earlier that showed inflation eased slightly in April.

The data supports bets the Federal Reserve can cut rates twice this year and, in turn, makes life easier for the European Central Bank, which is likely to start its rate-cut cycle next month.

Germany's 10-year bond yield, the benchmark for the euro zone bloc, was up one basis point (bp) on the day at 2.43%, having briefly dipped below 2.4% in early trading to its lowest since April 15.

It dropped nearly 12 basis points on Wednesday, extending earlier declines in the wake of the U.S. numbers showing U.S. consumer price index rose 0.3% last month after advancing 0.4% in March and February.

Excluding the volatile food and energy components, CPI rose 0.3% in April after advancing 0.4% for three straight months.

"The Federal Reserve will view this week's inflation report as encouraging, with rates and risk markets also responding appropriately positively," said Greg Wilensky, head of US fixed income at Janus Henderson Investors.

Markets are currently pricing in two Federal Reserve rate cuts for 2024, likely starting in September, and three cuts from the European Central Bank, starting next month.

Many ECB policymakers have said explicitly that they expect to cut rates in June - Thursday's remarks from Spanish central bank governor Pablo Hernandez de Cos were the latest example - but the outlook beyond that is more uncertain.

"With ECB rate cuts after June still up in the air, euro markets remain sensitive to U.S. moves," said ING analysts in a note.

Italy's 10-year yield was up 0.5 bps on the day at 3.73%, having dropped to one-month low of 3.71% in early trading. It fell by 16 bps on Wednesday, its biggest one-day fall in a year.

The gap between Italian and German 10 year yields was 130 bps, in the middle of its recent range.

Germany's two-year bond yield, was 2 bps higher at 2.91%. Like its longer dated peer, it touched its lowest since April 15 in early trade. (Reporting by Alun John Editing by Ros Russell, Christina Fincher and Andrew Heavens)