(Updated at 10:30 EST)

By Karen Brettell

March 7 (Reuters) - Benchmark 10-year U.S. Treasury

yields fell to one-month lows on Thursday after the European

Central Bank (ECB) revised down its inflation projections, but

rebounded to last be little changed on the day before key U.S.

jobs data on Friday.

Traders are also watching testimony by Federal Reserve Chair

Jerome Powell to Congress after he said on Wednesday that

interest rate cuts are likely in coming months, but only if

warranted by further evidence of falling inflation.

The ECB left interest rates unchanged as expected on

Thursday but acknowledged that inflation is easing faster than

once thought, potentially opening the way for rate cuts later

this year.

That sent European bond yields lower, with markets now

pricing in over 100 basis points rate cuts by the ECB this year.

Treasury yields also fell and were "following the move in

Europe," said Tom di Galoma, managing director and co-head of

global rates trading at BTIG in New York. "It was kind of a

dovish signal from the ECB."

Yields also moved lower following Powell's testimony on

Wednesday as investors unwound hedges that were placed in case

he took a more hawkish tone, said Guy LeBas, chief fixed income

strategist at Janney Montgomery Scott in Philadelphia.

"There was a prospect that Powell could come out

slightly more hawkish after January's high inflation print, but

he largely ignored it," LeBas said.

Investors will next watch Friday's employment report for

February for clues on when the U.S. central bank is likely to

begin cutting rates. It is expected to show that employers added

200,000 jobs during the month.

It comes after unexpectedly strong jobs and inflation

reports for January, which were attributed in part to seasonal

factors.

Benchmark 10-year yields were last little

changed on the day at 4.108%, after earlier reaching 4.054%, the

lowest since Feb. 5.

Two-year yields fell 2 basis points to 4.539%.

The inversion in the yield curve between two-year and 10-year

notes narrowed by two basis points to minus 43

basis points.

Fed funds futures traders are pricing in a 72% probability

the Fed will begin cutting rates in June, according to the CME

Group's FedWatch Tool.