Euro zone bond yields steady after US jobless claims data

(Updates news, headline and prices at 1440 GMT)

By Anna Pruchnicka and Joice Alves

LONDON, April 18 (Reuters) - Euro zone bond yields steadied on Thursday, trading near recent highs, after U.S. data pointed to continued labour market strength, while expectations of a June rate cut by the European Central Bank capped yields' rally.

ECB policymakers continued to line up behind a June interest rate reduction, but markets now see just three rate cuts this year, a big retreat from two months ago when between four and five moves were expected.

In the United States, the Federal Reserve is re-evaluating the need for any interest rate cuts this year in the face of resilient economic data and ongoing strength in the labour market.

Data showed the number of Americans filing new claims for unemployment benefits was unchanged last week. Initial claims for state unemployment benefits remained at a seasonally adjusted 212,000 for the week ended April 13. Economists polled by Reuters had forecast 215,000 claims in the latest week.

Germany's 10-year bond yield, the benchmark for the euro zone, was last 2 basis points (bps) higher at 2.49%. It hit its highest level since late February on Tuesday, recovering from a drop late last week when investors snapped up safe assets on rising Middle East tensions.

Yields move inversely to prices.

"If you look at yields on 10-year U.S. Treasuries, 10-year bunds, 10-year gilts, they all remain in an uptrend," Spinozzi said.

"Inflation is the main driver of the bond performance, and we cannot ignore that all these CPI reports that we have seen recently showed that CPI seemed to be a bit stickier."

Yields in Europe were also catching up with their counterparts in the U.S. after strong demand at the 20-year note auction drove yields lower, Spinozzi added.

The benchmark U.S. 10-year yield was up 4.6 bps at 4.63%, after a 7 bp drop the day before.

A recent surge in oil prices showed signs of losing steam. Oil prices were down 0.2% on the day after a 3% drop on Wednesday.

The German 2-year bond yield, most sensitive to expectations for policy rates, was down 3.8 bps to 2.99%.

Italy's 10-year bond yield was last flat on the day at 3.88%, after surging to its highest level since March 1 on Tuesday. (Reporting by Anna Pruchnicka, Joice Alves and Samuel Indyk; Editing by Amanda Cooper, Gareth Jones and Christina Fincher)