Euro zone bond prices cling onto previous day's gains

LONDON, July 22 (Reuters) - Euro zone bond prices on Tuesday were holding onto gains from the day before, when a rally, exacerbated by thin liquidity, sent German benchmark 10-year yields down by their most in four months.

The euro zone benchmark yield was last up a whisker at 2.63% after dropping 7 basis points on Monday, its biggest daily fall since April.

The yield on Germany's previously under pressure 30-year bond fell 8 bps on Monday and was last at 3.16%, again up marginally on the day.

"With market liquidity thinning during the summer, ... moves may be amplified," said analysts at ING in a note.

"The sharp decline in 30-year yields on Monday, for example, was difficult to justify from the news flow alone."

Mohit Kumar, chief Europe economist at Jefferies, said in a note that since German Bunds had been selling off since mid-June it was possible investors were looking to take profit heading into Thursday's European Central Bank meeting.

Economists expect the ECB to leave rates unchanged on Thursday, though the central bank's messaging will be closely watched as market pricing currently expects one further 25 basis point rate cut this year, potentially in September.

Germany's rate sensitive two-year yield was flat at 1.81%. DE2YT=RR

Moves elsewhere were largely in line with the benchmark.

France's 10-year yield FR10YT=RR was last flat at 3.31% after falling nearly 10 bps on Monday, its most since January, and Italy's 10-year yield IT10YT=RR was at 3.5%, up 2 bps after a 9 bp decline the previous day.