LONDON: Euro zone bond yields fell on Thursday, mirroring an earlier move in U.S. Treasuries, after the Federal Reserve was deemed to have struck a dovish tone by acknowledging recent market volatility. German 10-year yields - the euro zone's benchmark - fell 2 basis points to 0.35 percent, their lowest since April 2015. U.S. Treasury yields dropped 6 bps from their day's high of 2.05 percent after the statement was released late on Wednesday. Strategists said the cautious signal combined with the prospect of further easing from the European Central Bank showed global monetary policymakers were ready to react to recent market turmoil spurred by worries about a slowdown in China and plummeting oil prices. But the reaction across assets was not consistent. While money markets pared back expectations for upcoming rate hikes, equities sold off, suggesting some had been priced for a more prudent approach from the Fed. "Generally central banks are adopting a more conciliatory tone and that reflects fundamentals which are bond supportive with lower inflation expected for a long time," Societe Generale strategist Ciaran O'Hagan said. Shrugging off economic weakness in China, Japan and Europe, the Fed last month raised its key overnight lending rate by a quarter point to a range of 0.25 percent to 0.50 percent and issued upbeat economic forecasts that suggested four additional hikes this year. Prices for Fed funds futures on Wednesday showed traders had pushed back bets for the next rate hike to July from June and modestly trimmed bets on a March hike. Market indicators expect little more than one hike by the end of the year. The implications for global consumer price growth with oil near an 12-year low are of particular concern and a preliminary reading of German inflation due at 1300 GMT will hold focus. European money markets have fully priced in a further 10 bps cut in the ECB's deposit rate for March to -0.40 percent. At a country level, Italian Prime Minister Matteo Renzi on Wednesday defeated two no-confidence motions in parliament. This combined with easing fears about the financial sector after a deal was struck with the European Commission to help banks sell some of their 200 billion euros of bad loans buoyed investor demand for some of Europe's lower-rated debt. Italian 10-year yields fell 3 bps to 1.47 percent , while Spanish equivalents were down 5 bps at 1.58 percent and Portugal's were 6 bps lower at 2.70 percent. That backdrop helped Italy sell 7 billion euros of bonds on Thursday, paying less than a month ago on 5- and 10-year debt.

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