* Yields push away from multi-week lows
* ECB may change outlook, tweak guidance
* BOJ policymaker talks stimulus withdrawal
* Bank rescue plans see Italian bonds buck trend
By John Geddie
LONDON, June 8 Euro zone government bonds lost
some of their allure on Thursday as talk of the Bank of Japan's
exit from unprecedented monetary easing set the stage for
similar signals from the European Central Bank.
Yields - which move inversely to prices - nudged off
multi-week lows as a meeting of the bloc's monetary guardians
shifted the focus away from geopolitical events that have seen
investors stock up on safe-haven bonds in recent days.
While some cautious tightening from the ECB had long been a
fixture in the diary, a discussion by a BOJ policymaker about
withdrawing monetary stimulus took some investors by surprise as
it is still seen toiling with stubbornly low inflation.
"The reason we are a bit under pressure today is because
from a number of angles being long (bonds) doesn't look that
compelling anymore," RBC's global macro strategist Peter
Schaffrik said. "Whether that extends into a more prolonged
sell-off, we'll have to see."
German 10-year government bond yields, the bloc's benchmark,
edged up 3 basis points to 0.28 percent, moving
away from a six-week low of 0.245 percent hit Wednesday.
Most other euro zone equivalents were 2-3 bps higher on the
While the ECB is widely expected to keep policy unchanged on
Thursday, including its 2.3 trillion euro ($2.59 trillion)
bond-buying programme and sub-zero interest rates, sources told
Reuters it will acknowledge the improved economic outlook by
removing a reference to "downside risks" in its statement.
RBC is also expecting subtle changes to its forward guidance
to remove a reference to possible further cuts to interest
But any announcement on its quantitative easing (QE)
programme is likely to be put off until the autumn, when
policymakers hope the economic picture will have become clearer.
Aside from the focus on monetary policy, analysts said there
was broad relief across financial markets after former FBI
director James Comey's testimony on the bureau's investigation
into Russia's alleged interference in the 2016 U.S. presidential
election revealed little in the way of new details.
Investors have viewed this saga as a distraction for
President Donald Trump who they are pinning hopes on to reflate
the world's biggest economy with ambitious spending plans.
Italian government bonds bucked the broader trend, finding
demand after a report that Italian banks are considering
assisting in a rescue of troubled lenders Popolare di Vicenza
and Veneto Banca.
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 John Geddie; Editing by Andrew Heavens)