LONDON, July 17 (Reuters) - Euro zone benchmark 10-year

German yields sat near their lowest in three weeks on Wednesday,

a day ahead of a European Central Bank meet, which may provide

clues about the currency bloc's policy path as markets do not

expect a change in rates.

The German 10-year bond yield, the benchmark for

the euro zone bloc, fell 1.2 basis points to 2.42%, a whisker

above the previous day's three week lows.

Italy's 10-year yield was lower by 1.6 basis

points​ at 3.69%, its lowest since 10 April.

Signs that inflation is slowing around the world, alongside

some nervousness in European assets due to geopolitics have

helped euro zone bonds to rally.

Bond yields move inversely to prices.

The ECB meets on Thursday and is widely expected to hold

interest rates steady, while the outlook for future rate cuts

will depend on how the economy evolves.

Inflation has dropped since the ECB last met but has failed

to budge in the dominant services sector. Some policymakers felt

cornered into June's rate cut and are in no hurry to flag what's

next.

The gap between Italian and German bunds

narrowed 0.7 basis points to 127 bps, largely having priced out

a widening that took place in June when political uncertainty in

France sent investors to safe-haven bunds.

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

sensitive to European Central Bank rate expectations, was little

changed at 2.76%.

(Reporting by Alun John; Editing by Arun Koyyur)