* Yields hover just above multi-week lows
* Fed balance sheet trim could slow rate hikes
* Hotly-anticipated ECB minutes due on Thursday
* Chance of ECB rate rise in Dec below 20 percent
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, April 6 Euro zone government bond yields
edged back towards multi-week lows on Thursday as investors
weighed up the outlook for monetary policy in two of the world's
largest economic blocs.
Minutes from the U.S. central bank's last meeting released
late Wednesday showed most policymakers favour trimming its $4.5
trillion balance sheet later this year.
While this would be a tightening move, the market reaction
suggested investors think it may affect other policy levers and
slow the pace of interest rate hikes.
Suggestions from the U.S. House of Representatives Speaker
Paul Ryan that fiscal stimulus via tax reform could be some way
off also kept downward pressure on U.S Treasury yields and, in
turn, on the euro zone's flagship German yield, which has halved
over the past three weeks.
Minutes from the European Central Bank's last meeting, due
to be released on Thursday, also seeded caution in bond markets
as investors questioned whether they had read too much into
small tweaks to the ECB's policy message.
A source close to the ECB discussions told Reuters last week
that changes to its forward guidance had been over-interpreted
by markets which had immediately begun to price in the prospect
of rate increases at the end of the year.
"The FOMC's focus on ending its re-investments and downbeat
comments on a swift U.S. tax stimulus weighed on risk
sentiment," Commerzbank analyst Rainer Guntermann said.
"Today will provide more colour on the ECB discussion. The
ECB accounts of the latest Council meeting could help to
understand whether the market really 'over-interpreted'."
Germany's 10-year bond yield - the bloc's benchmark - edged
down 1 basis point to 0.25 percent, off a
one-month low of 0.24 percent breached Tuesday but still far
from the 14-month high of 0.51 percent reached in mid-March.
Most other euro zone yields were 1 to 2 basis points lower
on the day.
ECB chief Mario Draghi said on Thursday he sees no need to
deviate from the ECB's stated policy path, which includes bond
buying at least until the end of the year and record-low rates
until well after that to stimulate inflation.
Money market pricing suggest investors see less than a 20
percent chance the ECB will raise rates at the end of this year,
down from as much as 70 percent at the end of last month, and
around a 40 percent chance of a hike in March 2018.
For Reuters Live Markets blog on European and UK stock
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