Euro zone bond yields fall before German, Spanish CPI

LONDON, Oct 30 (Reuters) - Euro zone bond yields were lower on Wednesday before German and Spanish inflation releases that could affect interest rate expectations for the European Central Bank.

Euro area-wide figures are released on Thursday.

Germany's 10-year yield, the euro zone benchmark, fell 3.5 basis points (bps) to 2.296%, reversing some of Tuesday's 5 bp rise. It touched an almost three-month high of 2.352% on Monday.

Markets are currently pricing about 36 bps of easing at the ECB's next policy meeting in December, implying at least a quarter-point cut and around a 44% chance of a larger 50 bp move.

Softer consumer inflation figures from Germany and Spain could push markets to price in a greater chance of an half-point move at the ECB's December meeting.

Germany's two-year yield, which is sensitive to changes in interest rate expectations, fell 1.5 bps to 2.153%.

Eyes were also on Britain's first budget under the new Labour government.

Finance minister Rachel Reeves is expected to announce large tax hikes and spending plans, while hoping to avoid triggering the kind of bond market chaos that brought down former prime minister Liz Truss in 2022.

(Reporting by Samuel Indyk; Editing by Angus MacSwan)