LONDON, Oct 11 (Reuters) - Euro zone yields on Wednesday dropped to fresh two-week lows as bonds held onto their gains from Monday's rush to safe haven assets, while the gap between Italian and German yields was back below the 200 basis point level.

Germany's 10 year Bund yield, the benchmark for the currency bloc was down 4 basis points (bps) at 2.74%, its lowest since September 22.

German's 10 year yield, which moves inversely to the bond's price fell, 12.6 bps on Monday, as investors rushed to the safety of bonds due to the war in the Middle East.

Also behind the rally was a snap back in bonds, after heavy selling in September, and remarks from central bank policy makers on both sides of the Atlantic that gave investors reassurance that the European Central Bank and U.S. Federal Reserve had reached the end of their monetary tightening.

U.S. Treasuries were closed on Monday for a holiday, but the 10 year yield fall 12.7 bps on Tuesday, and a further 8 bps on Wednesday, ahead of crucial U.S. data that will set the tone for the government bond market as a whole.

"European bonds are largely following U.S. Treasuries with FOMC minutes, PPI and CPI looming, though let's see the ECB inflation survey," said Kenneth Broux head of corporate research, FX and rates at Societe Generale.

"It's too soon to tell if the Treasury move yesterday was catch up or short covering after long run up in yields," Broux added.

The minutes of the September meeting of the Fed's rate setting Federal Open Market Committee are due later today, as are U.S. factory gate price data, followed by consumer price data on Thursday.

Also in the mix in Europe is a 30 year German Bund auction, though, said Broux "German supply shouldn't be a problem".

The ECB Consumer Expectations Survey, closely watched for what it says about price rises, is also due later in the day.

Italy's 10 year yield was down 4.4 bps at 4.685%, a two week low, and the closely watched spread between Italian and German 10 year yields was 193 bps down from nearly 210 earlier in the week on worries about Italy's rising debt levels.

Britain's 10 year gilt yield dropped 6 bps to 4.37% also around a two-week low. (Reporting by Alun John; editing by Miral Fahmy)