LONDON - Euro zone bond prices rose slightly on Friday after their best month in more than a year, as investors waited to hear whether Federal Reserve Chair Jerome Powell would push back against the sharp fall in yields.

Germany's 10-year bond yield was last down 1 basis point (bp) at 2.438%, after rising 6 bps on Thursday. The yield, which moves inversely to the price, fell by 36 bps in November in its biggest monthly drop since July 2022, reflecting a dramatic rally in prices.

Italy's 10-year yield was last down 4 bps at 4.193%, after dropping by 49 bps in November.

"It's just a continuation of the very, very strong trend of this week. I don't see a catalyst," said Piet Haines Christiansen, fixed income strategist at Danske Bank. "What has been dominating this past week is kind of a fear of missing out."

Powell is speaking at 1600 GMT at a college in the U.S. state of Georgia. His Fed colleague Christopher Waller gave November's bond rally new legs this week when he suggested that interest rates could fall in the coming months as inflation cools.

Markets are now pricing in over 100 bps each of rate cuts from the Fed and European Central Bank next year but many central bankers, particularly in the euro zone, are pushing back against those bets.

Business survey data on Friday showed that the downturn in euro zone manufacturing continued in November, albeit at a slightly slower pace. Italy's factory sector fared worse than expected, however, contracting at the fastest rate since June.

Traders on Thursday moved to fully price in 25 bps of rate cuts from the ECB by April, after a slowdown in inflation and growth data across the bloc. By Friday, traders saw a roughly 65% chance of the first cut coming by March, according to money market pricing.

"It was a great month for markets... whether the trends of November continue into Christmas might in part depend on Powell’s speech later today," said Jim Reid, credit strategist at Deutsche Bank, in a note to clients.

Germany's 2-year bond yield, which is sensitive to ECB rate expectations, was last down 3 bps at 2.791%, around its lowest since June.

Euro zone bond investors will pay close attention to ratings agency Fitch's assessment of Greece on Friday, due after the market closes.

Strategists at UniCredit said they think Fitch is likely to upgrade Greece's sovereign credit rating back to investment grade, following S&P's upgrade in October.

"This would allow Greek government bonds to be included in most investment-grade bond indices and thus attract steady demand from a bigger pool of global investors," they said on Friday.

Greece's 10-year bond yield was down 1 bp at 3.694% on Friday. The spread of Greek yields over the German benchmark was at 115 bps, not far off the five-month low of 108 bps touched in late November.

The gap between Italy and Germany's 10-year bond yields narrowed to 174 bps. The yield spread, a gauge of investor confidence in the euro zone's more indebted countries, fell to a two-month low of 170 bps in November.

(Reporting by Harry Robertson; Editing by Kim Coghill and Sharon Singleton)