LONDON: Euro zone bond yields fell on Thursday as market expectations of a near-term US rate hike receded after minutes of the latest Federal Reserve meeting showed a split among policymakers.
The minutes appeared to suggest more economic data would be needed before a decision was made.
"The market is taking the Fed minutes as very dovish, so Treasuries are rallying, the dollar is falling," said Commerzbank analyst Christoph Rieger.
German Bund futures rose 46 ticks and euro zone government bond yields were down across the board. Ten-year German Bund yields fell 3 basis points to minus 0.075 percent, a fall mirrored by French and Dutch debt yields .
Spain's bond market gained a slight edge over its peers after signs of progress to end a political deadlock after elections in December and June left all parties short of a majority and unable to agree on terms to govern together.
Acting prime minister Mariano Rajoy said on Thursday he had taken a "decisive step" towards forming a government by agreeing to a pact with a smaller rival, but he still lacks the majority he needs to serve a second term.
Spain's 10-year bond yield fell more than 4 bps to 0.93 percent, narrowing the gap over German yields to 100 bps - its tightest level in more than a year. Portuguese bonds remained the region's underperformer following comments earlier this week by ratings agency DBRS that pressures were building on the country's creditworthiness.
The yield on Portugal's 10-year bond was up 2.5 bps at 2.93 percent, but off the day's high of 2.99 percent.
The ECB on Thursday published the minutes of its July meeting which revealed that the governing council was in no rush to make changes to monetary policy in the wake of Britain's June vote to leave the European Union.
"I think the focus will turn from the Fed to the ECB in the next few weeks, and what they will do in the September 8 meeting," said Antoine Bouvet, rates strategist at Mizuho International.
"People will be looking for clues on what the policy move will be, and if they are going to address the bond scarcity issue."
The ECB and other major central banks in developed countries are hoovering up bonds in asset-buying programmes aimed at stimulating inflation and growth.