LONDON, March 26 (Reuters) - Euro zone government bond

yields fell slightly on Tuesday as investors waited for the

first readings of March inflation data from the bloc and for

U.S. price figures on Friday.

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

for the euro zone, was last down 1 basis point (bp) at 2.361%.

Yields move inversely to prices.

** Euro zone yields have fallen over the last week as

central banks have talked more warmly about rate cuts, and after

the Swiss National Bank lowered borrowing costs.

** Spain and France are among the euro zone economies to

publish preliminary March inflation data this week. But the big

event will be the U.S. PCE inflation reading on Friday.

** Germany's two-year bond yield, which is

sensitive to European Central Bank rate expectations, was last 2

bps lower at 2.853%.

** Italy's 10-year bond yield was 1 bp lower at 3.685%

, with the closely watched gap to Germany's 10-year

yield at 131 bps.

** Yields remain higher for the year, as economies and

inflation have been somewhat slower to cool than initially

expected.