(Updates at 1154 GMT)

By Alun John

LONDON, March 25 (Reuters) - Euro zone bond yields rose

on Monday, in a small reversal of the previous week's declines

when a string of meetings by major central banks gave investors

greater confidence that interest rate cuts will come by the

middle of this year.

The main data releases this week are U.S. core PCE inflation

due Friday and flash consumer price index releases from Spain on

Wednesday, and France and Italy on Friday, though market

reaction could be affected by Easter holidays.

Germany's 10-year bond yield was up 3 basis points (bps) on

the day to 2.35%. But after the euro zone benchmark yield

dropped 11.5 bps last week, it is still is heading for its first

monthly fall of 2023.

The MOVE index of volatility in U.S. bond markets hit a two

year low on Friday.

Yields, which move inversely to prices, trended higher in

January and February as traders pushed back expectations of

substantial rate cuts until the middle of 2024, on the back of

stronger than expected economic data, particularly in the U.S.

But several central bank meetings last week saw markets

became more confident that cuts will come.

The U.S. Federal Reserve kept rates steady but reiterated

its projection that it would cut rates by 75 bps by the end of

the year; the Bank of England said the UK economy was heading in

the right direction for cuts; and, in Switzerland where

inflation is lower, the Swiss National Bank surprised markets by

reducing borrowing costs 25 bps.

Many European Central Bank policy makers have indicated they

expect to start cutting rates in June, and current market

pricing is broadly aligned with this, showing little chance the

ECB moves at its April meeting, but slightly more than an 80%

chance of a cut by June.

"There will be some more data by April, but there will be

even more data by June which will help the ECB's decision-making

process," said analysts at Natwest markets in a note.

They added that the data did not need to be lower than

expected to justify a cut - it "only needs to come in line with

expectations for the ECB to cut." They also said that, in their

opinion, the ECB could cut rates ahead of the Fed, a widely

discussed topic in markets.

As well as overall inflation in the currency bloc, the ECB

is particularly concerned about recent rapid wage growth. But

chief economist Philip Lane said on Monday the central bank was

increasingly confident that wage growth was slowing back towards

more normal levels.

Italy's 10 year yield was 5 bps higher at 3.69%,

after a 6 bp fall last week. The closely watched spread between

German and Italian yields was at 132 bps, up from

a more than two year low of 115 bps in mid-March.

Germany's two year yield was up 3 bps at 2.84%

and Italy's two year yield was up 2 bps at 3.42%.