(Updates at 1100 GMT)

By Harry Robertson

LONDON, March 7 (Reuters) - Euro zone bond yields fell

slightly on Thursday as investors waited for the European

Central Bank meeting later in the day, when investors will tune

in to President Christine Lagarde for hints about when interest

rates might start to fall.

Germany's 10-year bond yield, the benchmark

borrowing cost for the euro zone, was last down 3 basis points

(bps) from Wednesday at 2.303%. Yields move inversely to prices.

Bond yields have risen in 2024 - with the German 10-year

yield up around 30 bps - as investors have reined in their

expectations for rapid and steep interest rate cuts, with

economic data coming in stronger than expected and central

bankers sticking to a tough line on inflation.

The ECB will set rates at 1315 GMT (2.15 p.m. CET) and

Lagarde will hold a press conference at 1345 GMT.

Economists and investors say the ECB is certain to leave

rates at a record high of 4% but they will scrutinise Lagarde's

comments and new economic projections, which are expected to

downgrade inflation and growth forecasts for this year.

"The ECB are currently in a holding pattern, awaiting

further information on inflation before commencing their soft

landing," said Jason Davis, global rates portfolio manager at

JPMorgan Asset Management.

"We expect the ECB to reduce their inflation forecasts given

the better than expected progress towards target."

Italy's 10-year bond yield was 3 bps lower at

3.632% after a three-day slide helped take the closely watched

spread over Germany's 10-year yield to its lowest

since early 2022 at 130 bps. That gap stood at 131 bps on

Thursday.

Yields cooled on Wednesday as investors took comfort from

U.S. Federal Reserve chair Jerome Powell's balanced comments on

inflation and interest rates. Powell said he still expected rate

cuts in the coming months if inflation continued to drop.

Market pricing suggests investors expect both the ECB and

the Fed to start cutting rates in June, with around 90 bps of

cuts expected from both central banks this year.

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

to ECB rate expectations, was down 4 bps on Thursday at 2.835%.