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* Euro zone bond yields keep lows in sight
* Australia cuts key interest rate
* U.S. rate cut speculation grows
* EZ flash inflation weaker-than-expected
* Italian bond yields tumbled after PM Conte speech
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates with EZ inflation numbers)
LONDON, June 4 (Reuters) - Germany's 10-year Bund yield held near record lows on Tuesday while even longer-dated yields in the euro area hit fresh lows on rising talk of rate cuts from major central banks and data showing euro zone inflation slowed more than expected in May.
Australia's central bank on Tuesday cut its cash rate to a record low 1.25% in what could be the first in a series of stimulus measures.
St. Louis Federal Reserve president James Bullard said on Monday that a U.S. interest rate cut "may be warranted soon" given risks to global growth posed by trade tensions and weak U.S. inflation.
And in the euro zone, news that inflation fell to 1.2% in May from 1.7% in April only added to a sense that Thursday's ECB meeting is likely to prove dovish.
In a potentially more worrying sign, underlying inflation or prices excluding volatile food and energy prices - the ECB's preferred measure - fell to 1.0% from 1.4% a month earlier.
Germany's Bund yield fell to minus 0.21% and within sight of Monday's record low. France's 30-year bond yield fell about four basis points to 1.19% - its lowest since late 2016.
Dutch and French 10-year bond yields held within sight of multi-year lows .
"The inflation numbers show further slippage, which presents a challenge for the ECB," said Neil MacKinnon, global macro strategist at VTB Capital.
Investors have ratcheted up rate-cut bets sharply in the past two weeks. Market pricing suggests more than two Fed rate cuts are priced in for this year.
And in the euro zone, money market futures now price in roughly a 50% chance of a 10 basis-point rate cut by the end of the year.
The ECB meets on Thursday and is widely expected to deliver some form of action in the form of more details on a new round of cheap, multi-year loans to banks.
"I think we will see a pretty dovish message from (ECB chief Mario) Draghi this week," said Mark Dowding, a senior portfolio manager at BlueBay Asset Management.
"The appearance of downside risks means the ECB will want to convey to investors that the scope for monetary policy action is not exhausted and they stand ready to support the economy and inflation if conditions weaken."
In Italy, comments from Italian Prime Minister Giuseppe Conte after Monday's market close boosted bond markets and banking stocks.
Conte said the government had to abide by EU budget rules until such time as they could be changed. He also told his two coalition partners to end their constant feuding or seek new elections, threatening to resign.
The Italian-German 10-year bond yield gap narrowed to 270 bps, its tightest in just over a week. (Reporting by Dhara Ranasinghe; editing by John Stonestreet and Andrew Heavens)