Borrowing costs in the euro area nudged further away from recent lows yesterday, as signs that ECB policymakers are a step closer to winding back hefty monetary stimulus weighed on sentiment.

European Central Bank board member Benoit Coeure said that given the persistent challenges faced by the ECB in raising consumer prices, its definition of ‘medium-term', the time horizon required to meet its inflation target, would be longer than usual. Those comments briefly pushed bond yields down.

Although the ECB is expected to take baby steps towards exiting its stimulus scheme, news that policymakers have already discussed policy options has tempered sentiment in bond markets.

Reuters reported on Friday that ECB officials generally agreed their next move would be to cut bond purchases, and discussed four options, according to sources. The news jolted markets a day after the ECB left policy unchanged and suggested October would be decision time regarding the future of the 2.3 trillion euro bond-buying scheme.

The four options being considered, according to Friday's report, include cutting monthly asset purchases from the current 60 billion euros to 20 or 40 billion from the start of 2018, with the scheme running for another six or nine months. Analysts said that this discussion of numbers in particular has unnerved the bond market.

"On Thursday there was a lot of relief that the ECB would stick to its expansionary stance, but latest comments suggest there is an ongoing discussion and that there are several council members in favour of a less expansionary stance," said DZ Bank strategist Daniel Lenz. "We learnt the buying volume could be lower than previous market expectations."