Euro zone yields nudge up from one-month lows

LONDON, Jan 8 (Reuters) - Euro zone bond yields held close to one-month lows on Thursday, having dropped this week as softer than expected inflation data caused traders to reconsider interest rate bets that pushed yields to multi-month highs late last year.

Germany's 10-year yield, rose nearly 2 basis points in early trading to 2.82% DE10YT=RR but the euro zone benchmark is still down over 7 bps this week so far.

Bond yields move inversely to prices, and Germany's 10-year yield touched a one-month low of just under 2.8% on Wednesday after data showed euro zone inflation slowed to 2% last month.

Investors expect the ECB to keep its policy rate steady throughout this year, but the recent data has shifted the discussion on to the small chance of another rate cut, as opposed to late last year when traders were considering the slight prospect of a rate hike this year.

That potential rate hike, and broad worries about the scale of borrowing around the world pushed Germany's 10-year yield up 17 bps in December to its highest since March.

"Short positions in Bunds had started to become stretched and some pullback was due," said Mohit Kumar, chief economist for Europe at Jefferies.

France and Italy's 10-year yields were also each up nearly 2%, with France's at 3.54% and Italy's at 3.49%. FR10YT=RR, IT10YT=RR