LONDON, May 7 (Reuters) - Euro zone yields fell for a

fourth straight session on Tuesday after investors increased

their bets on interest rate cuts from the Federal Reserve and

the European Central Bank this year, following weak U.S. jobs

data on Friday.

Germany's 10-year bond yield, the benchmark for

the euro zone, was down 5.5 basis points (bps) to 2.418%, its

lowest level since April 15.

Money markets priced around 75 bps of ECB rate cuts in 2024

, a level reached last week after the U.S.

data. They discounted 45 bps of Fed monetary easing,

implying an 80% chance of a second cut in 2024.

A string of hot data in the world's most important

economy had led investors to price less than two Fed rate cuts

this year, down from around seven at the start of 2024. The

importance of the U.S. economy meant investors also lowered

their expectations for other major central banks.

"Little stands in the way of the gradual drift lower in

yields," said Christoph Rieger, head of rates and credit

research at Commerzbank.

"The thin (data) calendar ... is unlikely to change the view

that the U.S. economy is slowly losing steam."

Italy's 10-year government bond yield dropped

3.5 bps to 3.77%.

The spread between Italian and German 10-year yields - a

gauge of risk-premium investors ask to hold bonds of the euro

area's most indebted countries - was up 4 bps at 134.50 bps

after reaching 135.60, its widest level since April 26.

It briefly

hit

a fresh 1-1/2-month low at 120.20 on Monday as

Fitch

confirmed a BBB rating on the Italian debt.

Preliminary data showed on Tuesday that orders for

BTP-valore - a new retail bond Italy is offering this week -

were at 5 billion euros at 0940 GMT of the second day of the

offering, down from 11.5 billion euros at the end of the second

day of February's sale.

Retail investors have supported demand for peripheral

bonds for months as they rushed to lock in the most appealing

returns over a decade. Bond prices move inversely with yields.

Germany's 2-year bond yield, which is more sensitive

to policy rate expectations, was down 1 bp at 2.904%.

Data on Tuesday showed that German exports rebounded in

March, supported by strong U.S. and Chinese demand, although a

disappointing month for industrial orders indicated weakness in

the economy was lingering.

"We expect rising real wages and easing financial conditions

to boost domestic demand over the coming quarters, with a

rotation back from services to goods," said Christian Schulz,

deputy chief European economist at Citi.

"However, we expect the impetus to be curbed by fiscal

normalization and lagged effects of the sharp monetary

tightening," he added.

ECB policymakers said on Monday they were growing more

confident about cutting interest rates, as the economy returns

to mild growth and inflation looks to be under control.

Gross domestic product figures last week showed the euro

zone's economy grew 0.3% in the first quarter after a small

recession. Euro zone inflation fell to 2.4% in April.