(Updates moves, context; adds analyst comment)

LONDON/GDANSK, June 12 (Reuters) - Germany's 10-year

yield dropped to a near six-week low on Thursday as bonds

benefitted from safe-haven flows on market jitters about trade

and tensions in the Middle East, a day after soft U.S. inflation

numbers.

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

zone, was nearly 5 basis points lower at 2.486%, paring some

declines after dipping to its lowest since early May at 2.469%.

.

Yields around the world dropped on Wednesday after data

showed U.S. consumer prices increased less than expected in May

helped by cheaper petrol, and as healthy appetite at an auction

of U.S. Treasuries further improved sentiment.

Supporting the bond rally into Thursday was a global

risk-off tone after U.S. President Donald Trump said the United

States would send out letters in one to two weeks outlining the

terms of trade deals to dozens of countries, which they could

embrace or reject.

Separately, Trump said U.S. personnel were being moved out

of the Middle East because "it could be a dangerous place".

Safe haven currencies like the Japanese yen and Swiss franc

also rallied and stocks fell.

While U.S. Treasury yields extended their fall after

U.S. producer price and weekly jobless claims data on Thursday,

and were on track for a

fourth straight day of declines, the print hardly saw any

reaction in euro zone bonds.

U.S. government data on Thursday showed producer prices

rose 2.6% in May from a year earlier, in line with economists'

expectations.

"While the combination of the CPI and PPI releases does

not suggest any material upside to inflation last month, we

suspect Fed officials will remain cautious and on guard against

the risk for future tariff pass-through into higher consumer

prices," analysts at J.P. Morgan wrote in a note to clients.

"We continue to look for such an increase in consumer

prices to peak during the summer months."

Back in Europe, eyes were on European Central Bank speakers

as investors tried to ascertain whether last week's interest

rate cut was the last in the current cycle, despite the ECB

forecasting that inflation would fall meaningfully below its 2%

target next year.

ECB's Executive Board Member Isabel Schnabel said on

Thursday that interest rates were in a "good place" because

inflation is likely to return to target in the medium term.

However, Lithuanian policymaker Gediminas Simkus said

interest rates may need to come down further this year because

of the undershoot risk.

Markets are currently pricing in one more rate cut this year

.

Other euro zone bonds largely moved in line with the

benchmark. Italy's 10-year yield was down 4 bps at 3.42%.

Germany's interest rate sensitive two-year yield was down 3

bps at 1.82%.