(Updates at 1238 GMT after US CPI data)

By Samuel Indyk and Alun John

LONDON, May 15 (Reuters) - Euro zone bond yields dropped

on Wednesday after U.S. consumer prices increased by less than

expected in April.

The U.S. consumer price index rose 0.3% last month after

advancing 0.4% in March and February, the Labor Department's

Bureau of Labor Statistics (BLS) said on Wednesday.

In the 12 months through April, the CPI increased 3.4% after

climbing 3.5% in March. Economists polled by Reuters had

forecast the CPI gaining 0.4% on the month and advancing 3.4%

year-on-year.

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

euro zone bloc, was last down 10 basis points at 2.43%,

extending a decline ahead of the data, and putting it on track

for its biggest daily drop since April 12.

Euro zone yields are highly responsive to U.S. data given

investor expectations that policy makers at the European Central

Bank will not wish to cut rates substantially while the U.S.

Federal Reserve remains on hold, and the global nature of some

aspects of inflation.

An ECB rate cut in June is seen as highly likely but its

path beyond that remains uncertain. Markets slightly increased

expectations of the scale of ECB cuts this year after the data

and are close to pricing in three 25 basis point cuts in 2024.

Italy's 10-year yield was lower by 14 bps at

3.76%.

The 10 year U.S. Treasury yield was last down 7 bps at

4.37%, its lowest in a month.