Euro zone bonds steady as focus shifts to this week's ECB meeting

LONDON, April 27 (Reuters) - Euro zone bonds held steady in early trading on Monday with no major weekend developments in the U.S.-Israeli war on Iran to react to ahead of this week's European Central Bank meeting.

While policymakers are expected to keep rates steady on Thursday, investors will be closely watching their statement and President Christine Lagarde's press conference for any expectations for the euro zone economy and what policy response might be appropriate.

Markets currently see roughly a 20% chance that the ECB hikes rates by 25 basis points this week, around a 75% chance they do so by their June meeting and expect at least one such move and potentially two by their July meeting.

Before the war, markets thought the ECB would be on hold throughout this year, but traders dramatically reassessed those expectations in March, betting policymakers would feel obliged to raise rates to prevent higher energy costs spilling over into inflation more broadly.

The Monday ECB pricing was roughly in the same place as it was on Friday, as were bonds.

Germany's 10-year yield, the benchmark for the euro zone, was up a whisker at 3.01% and its two-year yield was a fraction lower at 2.55%.

Other countries' bonds were moving in line with the benchmark and Italy's 10-year yield was flat at 3.81%. (Reporting by Alun John; Editing by Thomas Derpinghaus)