* Yields hover just above multi-week lows
* Fed balance sheet trim could slow rate hikes
* Bonds unmoved as Czechs abandon currency cap
* Chance of ECB rate rise in Dec below 20 percent
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
(Adds ECB minutes, Czech cap removal)
By John Geddie
LONDON, April 6 Euro zone government bond yields
hovered near multi-week lows on Thursday as investors weighed up
the outlook for monetary policy in two of the world's largest
Minutes from the U.S. central bank's last meeting released
late on Wednesday showed most policymakers favour trimming its
$4.5 trillion balance sheet later this year.
While this would be a tightening move, some analysts said it
may affect other policy levers and slow the pace of interest
rate hikes, prompting a mixed market reaction.
Suggestions from the U.S. House of Representatives Speaker
Paul Ryan that fiscal stimulus via tax reform could be some way
off was also seen capping moves in U.S Treasury yields and, in
turn, the euro zone's flagship German yield, which has halved
over the past three weeks.
In Europe, comments from European central bankers Mario
Draghi, Peter Praet and Vitor Constancio suggested the ECB would
not change its policy message this month in the face of mounting
calls from Germany for it to wind down its stimulus.
A source close to 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.
Thursday's ditching by the Czech central bank of its cap on
the crown against the euro had little effect on euro zone bonds.
Germany's 10-year bond yield - the bloc's benchmark - held
at 0.25 percent, close to a one-month low of 0.24 percent
reached on Tuesday. It remains far from the
14-month high of 0.51 percent reached in mid-March.
Most other euro zone yields were flat to slightly lower,
though Ireland was a notable outperformer, the yield on its
10-year government bond dropping 4 basis points to a one-month
low of 0.94 percent.
The yield on France's 10-year government bond dropped 2.2
bps, adding to Wednesday's 2.5 bps fall on easing concerns over
the outcome of next month's presidential election runoff.
Money market pricing suggests 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
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Andrew Bolton and John Stonestreet)