* Fed minutes signal cautious approach to further rate hikes
* BOJ official rules out imminent hike in bond yield target
* ECB also cautious in face of stronger data
* Bond yields fall across board
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
(Adds OPEC meeting result, updates prices)
By Dhara Ranasinghe
LONDON, May 25 Borrowing costs across the euro
area fell on Thursday on further signs that major central banks
are wary of stepping back from ultra-loose monetary policies too
U.S. Federal Reserve policymakers agreed they should hold
off on raising rates until it was clear a recent U.S. economic
slowdown was temporary, though most said a hike was coming soon,
minutes from their last policy meeting showed on Wednesday.
Bank of Japan board member Makoto Sakurai on Thursday ruled
out the chance of an imminent hike in the BOJ's bond yield
target, stressing the need to maintain its massive stimulus
programme to prop up inflation.
As is the case in the euro zone, growing signs of life in
Japan's economy have presented the BOJ with a communications
challenge, pushing it to be clearer with markets on how it might
dial back its stimulus, although such action remains a long way
In the single-currency bloc, European Central Bank officials
have indicated this week that while monetary policy will reflect
an improving economy, inflation remains weak so there is no need
to deviate from the policy path already laid out.
"The BOJ and the ECB are the ones with the long-standing
structural weaknesses and there are bigger fears about the risk
of a taper tantrum," said Chris Scicluna, head of economic
research at Daiwa Capital Markets.
"That's why the ECB and BOJ will be a lot more cautious in
their communication as well - they don't want to take any risks
even though things are going well in both Europe and Japan."
The tone of central bank wariness has comforted
rate-sensitive bond markets, although traders expect the next
Fed hike to come next month.
As European markets approached the close, Germany's 10-year
Bund yield - the benchmark for the region - was down 3.5 bps to
0.37 percent. It is down almost 10 bps from
seven-week highs hit earlier in May.
Most other euro zone yields slipped 3-4 bps, while U.S.
Treasury yields were flat.
The Fed minutes also showed that staff proposed a plan to
wind down the more than $4 trillion of debt securities amassed
as part of efforts to stimulate the economy. In a move some
investors cited as reassuring, the plan included a limit on how
much would be allowed to fall off the balance sheet each month.
"The way the Fed is going to achieve balance sheet
normalisation can be interpreted as mildly bullish," said
Rabobank bond strategist Lyn Graham-Taylor.
Trade was generally subdued due to a public holiday in a
number of countries across Europe.
Bond prices were steady after an OPEC meeting in Vienna,
when cuts in oil output were extended by nine months to March
This is primarily because the move was largely priced in;
oil prices actually dropped 0.9 percent on Thursday
after nearly three weeks of steady gains.
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
(Reporting by Dhara Ranasinghe; Editing by Alison Williams)