April 17 (Reuters) - Two-year German government bond

yields dropped sharply on Friday to one-month lows after Iran's

foreign minister said on Friday that passage for all commercial

vessels through the Strait of Hormuz is declared completely open

for the remaining period of ceasefire.

Two-year Schatz yields, the most sensitive to

shifts in expectations for rates and inflation, fell as much as

11.2 basis points to 2.412%, before pulling back to 2.43%,

showing a 9.6-bp drop on the day. Two-year yields hit their

highest since last July in late March, at around 2.77%.

Money markets scaled back bets on European Central Bank rate

hikes and priced in an 8% chance of a rate hike at this month's

meeting, from 15% earlier in the session. They also indicated

ECB deposit facility rate at 2.44% by year-end

, from 2.55% earlier in the session.