UPDATE 1-Euro zone bond yields drop after central bank excitement

(Updates at 1550 GMT)

By Alun John and Harry Robertson

LONDON, March 22 (Reuters) - Euro zone bond yields fell on Friday and were on their way to a weekly decline, after central banks reassured investors that interest rate cuts in several markets are likely to come in the summer.

Germany's 10-year bond yield, the euro zone benchmark, was down 7 basis points (bps) at 2.326%. It was on track for a weekly fall of 11 bps, and was trading around its lowest in a week.

Yields have been rising for much of 2024 as resilient economic data, particularly in the United States, has caused traders to push back expectations of substantial interest rate cuts until the middle of 2024.

But several central bank meetings this week saw markets became more confident that cuts would at least come by the middle of the year.

"A lot has happened, there have been a lot of central bank meetings, but if you take a step back we are much closer to the point where central banks want to and are going to start cutting, and we have had the first cut from the Swiss central bank," said Jamie Niven, senior fixed income fund manager at asset manager Candriam.

The Federal Reserve on Wednesday kept rates steady but reiterated its projection that it would cut interest rates by 75 bps by the end of the year, then on Thursday the Bank of England said the economy was heading in the right direction for cuts.

In Switzerland, where inflation is lower, the Swiss National Bank surprised markets by reducing borrowing costs 25 bps.

Italy's 10-year yield was last down 3 bps at 3.637% and set for a weekly fall of 6 bps.

The closely watched spread between German and Italian yields was at 130 bps, up from a more than two year low on of 115 bps last Thursday.

Bonds rose further in the afternoon session, pushing yields lower, although there was little in the way of data to excite markets.

"The moves seem typical of an end-of-quarter risk-off tone driven by portfolio rebalancing or deleveraging," said Michiel Tukker, rates strategist at ING.

"Such moves can be frontloaded a week in advance, and we saw a similar picture on the last Friday in February."

Markets see a roughly 85% chance that the European Central Bank and Federal Reserve will cut rates by their June meetings.

Bundesbank President Joachim Nagel on Friday added his name to a long list of policymakers suggesting that June was the date, saying the ECB might be in a position to cut interest rates before the summer recess.

Markets were also digesting a survey released on Friday showing German business morale improved in March and beat expectations.

Rate sensitive shorter-dated bond yields were also set for weekly declines, Germany's two-year yield down 5 bps at 2.806% and set for a weekly drop of 10 bps. (Reporting by Alun John and Harry Robertson; Editing by Kim Coghill, Alex Richardson and Alison Williams)