LONDON, March 12 (Reuters) - Euro zone bond yields

steadied on Tuesday, after last week posting their biggest

weekly fall since December, as investors waited for U.S.

inflation data that could firm expectations for a summer Federal

Reserve rate hike.

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

euro zone, was 0.8 basis points (bps) lower at 2.29% at 0930

GMT. It fell 14.5 bps last week, its biggest weekly drop in 12

weeks, to hit 2.233% on Friday, its lowest since Feb. 2.

Bond yields move inversely to prices.

Yields have come under pressure as both European Central

Bank (ECB) President Christine Lagarde and Federal Reserve Chair

Jerome Powell signalled that they could start cutting rates in

June. Mixed U.S. labour market data on Friday also supported

that view.

U.S. inflation data due later in the day is expected to show

a monthly increase of 0.4% in February and 3.1% on an annual

basis. Core consumer prices are seen rising 0.3%, which would

nudge the annual pace down to 3.7%.

"Market is in a wait and watch mode for the CPI print today,

which should set the tone for the markets over the coming

weeks," said Mohit Kumar, Chief Economist and Strategist for

Europe at Jefferies, adding he expects a first Fed cut in June,

in line with markets.

"Today's CPI print will be an important marker for that

timeframe. An inline or weaker print would reinforce our view of

the June cut and be welcomed by the markets."

Markets are not pricing in a Fed cut at next week's meeting

but a more than 60% chance of one in June, the CME FedWatch Tool

showed.

"The important point for investors is not when they start

but how deep they and other central banks go," said Will Hobbs,

Head of UK Multi-Asset Wealth, Barclays Private Bank & Wealth

Management.

"Will we return to the basement levels seen last economic

cycle or is a new normal in store?"

Germany's two-year yield, which is sensitive to

changes in policy rates, rose 1 bp to 2.77%.

Italy's 10-year government bond yield was 2.2

bps lower at 3.60%. The spread over Germany's 10-year yield

- a gauge of the risk premium investors ask to

hold bonds of the euro area's most indebted countries - stood at

130 bps. It hit 128.4 bps the day before, its narrowest since

January 2022.