UPDATE 2-Euro govt bond markets seek post-Fed direction

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Adds details, updates prices)

By Yoruk Bahceli and Danilo Masoni

June 22 (Reuters) - Euro zone bond yields saw choppy trading on Tuesday as the focus turned to supply and investors sought fresh direction in the aftermath of last week's Fed policy shift.

The U.S. Federal Reserve projected an accelerated timetable for interest rate hikes as they brought forward their first projected increase to 2023 from 2024.

That pushed up shorter-dated U.S. Treasury yields, which are sensitive to interest rate changes, while longer-dated yields fell as the move indicated the Fed will not let inflation surge as high as feared, flattening the yield curve.

In the euro area, shorter-dated German bond yields have risen much less, but longer-dated yields have not fallen, leading to a steeper curve between two and 10-year yields than prior to the Fed.

On Tuesday, 10-year yields across the bloc rose initially as much as 3 basis points (bps). They later fell back before rising again, tracking gains in U.S. yields ahead of comments from Federal Reserve Chair Jerome Powell.

Germany's 10-year yield, the regional benchmark, was up 0.6 bps at -0.165% by 1504 GMT after hitting earlier in the session a four-week high at -0.146%.

Italian 10-year yields also saw erratic trading and were up around 1 bps at 0.889% after initially falling around 2 bps. French and Spanish 10-year yields were last both little changed.

"I think bond markets are trying to establish new ranges while they are digesting the FOMC message last week," said Piet Christiansen, chief analyst at Danske Bank, referring to the Fed.

A key market gauge of long-term euro zone inflation expectations rose above 1.56% after falling to a three-month low on Monday.

"That we see inflation expectations coming slightly higher today is part of this narrative of bond markets finding their footing. This could take a couple more days," Christiansen added.

In issuance, Spain raised 8 billion euros from a new 10-year bond, which received over 74 billion euros of demand, according to two lead managers.

The Netherlands raised 1.96 billion euros from the re-opening of a 15-year bond via auction.

A second area of focus was comments from the European Central Bank (ECB).

Loose policy is still required to aid the euro zone's recovery from the pandemic-induced recession, Slovak central bank chief Peter Kazimir said, following dovish commentary from ECB President Christine Lagarde on Monday.

ECB board member Isabel Schnabel was due to speak later at 1730 GMT.

Rishi Mishra, rates strategist at Futures First, said shorter-dated euro area government bond yields were anchored by the ECB, which "has not even hinted at tightening policy".

ECB policymakers are still some way apart on their new inflation strategy but hope to reach an agreement before debating the future of their pandemic emergency bond purchases PEPP in September, Reuters reported on Tuesday.

Following the European markets close, focus will be on Fed chairman Jerome Powell's testimony at a congressional hearing at 1800 GMT. (Reporting by Yoruk Bahceli and Danilo Masoni Editing by John Stonestreet and Lisa Shumaker)