Pushed by American diplomats, Bosnia and rival Yugoslavia inched toward peace Wednesday with an agreement to open offices in each other’s capitals.

Liaison offices would represent the highest level of formal contact between the two countries since Bosnia broke from the Serbdominated Yugoslav federation 3-1/2 years ago, triggering a rebellion by Bosnian Serbs.

U.S. envoy Richard Holbrooke announced the deal in what he said was his last swing through the area before crucial peace talks among Serbian, Croatian and Bosnian leaders begin Oct. 31 in the United States.

Holbrooke said Wednesday’s accord did not mean mutual diplomatic recognition between Bosnia and Yugoslavia, which now consists only of Serbia and tiny Montenegro.

“This is a small step on a long and difficult road,” he said after meeting Bosnian government leaders in Sarajevo.

No date was given for when the offices would open.

U.N. officials said a week-old truce negotiated by Holbrooke appeared to be holding, although sporadic fighting persisted in northwest Bosnia. Each side blamed the other.

Meanwhile, Secretary of State Warren Christopher said the next round of peace talks will be held at Wright-Patterson Air Force Base near Dayton, Ohio. Holbrooke, who will mediate the negotiations, pledged to keep them secret until they conclude.