UPDATE 2-Euro zone bond yields drop with UK equivalents as BoE backs off hike

* Bank of England policymakers edge away from rate hike

* Britain's bond yields fall, pulling down euro zone yields

* Concerns over global consensus on tighter policy dissipate

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Writes through)

LONDON, Aug 3 (Reuters) - Euro zone government bond yields dropped across the board on Thursday after the Bank of England kept rates unchanged, reducing concerns over a potential coordinated tightening of monetary policy.

Faced with uncertainty about the impact of Brexit on the world's fifth-biggest economy, the BoE trimmed its growth expectations for this year and next as rate-setters voted 6-2 to keep the Bank rate at a record low of 0.25 percent.

This was down from a split of 5-3 at the last meeting in June, the closest it has come to raising rates in a decade. But Governor Mark Carney and his top officials reiterated that they might raise borrowing costs by a bit more than investors expect over the next three years, possibly within a year.

British bond yields fell sharply after the decision -- 10-year gilt yields were 8 basis points lower at 1.15 percent -- and as the day wore on, euro zone yields dropped as well.

The yield on Germany's 10-year bond hit a one-month low of 0.46 percent, down 3 basis points on the day. Most other euro zone bond yields were also down 3-4 bps on the day.

"Ever since Mario Draghi's Sintra speech, the market has been concerned that there is a coordinated will across global central banks towards monetary tightening," said Mizuho strategist Peter Chatwell. "I think this (BoE) meeting puts paid to that fear."

He was referring to Draghi's speech in Sintra, Portugal, on June 27 when the European Central Bank chief signalled that the ECB is open to policy tweaks.

On Thursday, the gap between the German and British benchmarks tightened to 70 basis points, not far from the 65 basis points reached in mid-July, which was the narrowest in nearly 11 months.

For its part, the U.S. Federal Reserve may in the coming months announce steps to trim its massive balance sheet.

San Francisco Fed President John Williams said on Wednesday that the U.S. economy was likely to be strong enough for such a move in September.

At the auctions, France sold over 6 billion euros of bonds while Spain sold over 4 billion euros of bonds.

Analysts said these debt sales had contributed to the earlier rise in euro zone yields as investors sold outstanding bonds to make room in their portfolios for the new supply.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s

(Reporting by John Geddie, graphic by Nigel Stephenson; Editing by Catherine Evans)