LONDON: Germany’s 10-year bond yield, the benchmark for euro zone borrowing costs, was on track for its biggest weekly fall since late July on Friday, after a week in which major central banks kept their stimulus taps running.

Though euro zone bond yields edged higher on Friday, that followed hefty falls over the previous two days after the US Federal Reserve left interest rates unchanged on Wednesday.

“That decision gave comfort to the market that central banks are still in expansionary mode,” said DZ Bank analyst Rene Albrecht.

The Bank of Japan shifted its focus towards a steeper yield curve but said it would keep buying large amounts of bonds.

The German 10-year yield was up 1 basis point at minus 0.81 percent, still firmly in negative territory. It was on track for a weekly fall of more than 8 basis points, its biggest since late July.

This week’s “relief rally”, as Albrecht put it, comes after a period in which many investors were concerned central banks were stepping back from their relentless easing stance of recent years.

The concerns were triggered by the ECB’s decision to leave its policy stance unchanged when it met on Sept. 8.

Lower-rated euro zone yields rose faster than their higher-rated counterparts, with Spain’s 10-year yields rising 4 bps to 0.97 percent and Italian equivalents gaining 2 bps to 1.21 percent.

The spread between the two is close to its highest level since early 2015.

“On the back of the ECB meeting there was a bearish correction, which reflected market disappointment,” said Patrick Jacq, European rate strategist at BNP Paribas.

“The Fed and BoJ meetings are now over and a bullish tone is reasserting itself,” he said, adding the prospect of negative net bond supply in the weeks ahead and political risks in, for example, Italy were supportive for safe-haven German bonds.

Data on Friday showed euro zone business activity growing, but not by enough to change the direction of bond yields.

Flash purchasing managers’ index (PMI) data showed a mixed picture from the bloc’s two largest economies: French business activity hit a 15-month high while Germany’s private sector growth slowed to a 16-month low.

Euro zone business activity as a whole expanded at its weakest rate since the start of 2015 this month.

ECB Vice President Vitor Constancio said the central bank had hoped the euro zone economy would respond to its stimulus measures more quickly.—Reuters