By Marius Zaharia
LONDON, March 11 (Reuters) - Euro zone bond markets stabilised on Friday after a sell-off triggered by ECB President Mario Draghi saying he did not anticipate further rate cuts, which dampened enthusiasm for a wide package of stimulus measures.
However, two-year German bond yields were on course for the biggest weekly rise since early December, the last time the European Central Bank disappointed markets.
On Thursday the ECB raised monthly asset purchases to 80 billion euros from 60 billion and cut its deposit rate by 10 basis points to -0.4 percent. It also shaved 5 basis points off its main refinancing rate and the marginal rate.
The bank said it would start buying corporate debt and offered to pay banks for lending to companies in the ailing euro area in a bid to kickstart growth and stave off the threat of deflation.
Overall, it was much more than the market had expected. But Draghi's comments that there may be no need for further rate cuts have grabbed the attention of investors.
Money market rates, bond yields and the euro all shot up, while stock markets sold off.
On Friday, however, 10-year German Bund yields were down 4 basis points at 0.27 percent, having traded between 0.16 percent and 0.33 percent on Thursday.
"Draghi must be scratching his head with the euro rallying while Bunds and equities sell off sharply - despite his over-delivery on almost all accounts," Commerzbank rate strategist Michael Leister said.
"Upon closer inspection the dovish elements should prevail even with rate cuts off the table for now."
Two-year German yields were flat at minus 0.46 percent, having risen more than 10 basis points on Thursday.
A 5 basis point difference between the April and December Eonia rates still reflected a 50 percent chance of another rate cut by the end of the year, but the gap has shrunk from 15 basis points before the ECB meeting.
Long-term inflation expectations only inched 2 basis points higher to 1.49 percent, remaining well below the ECB's inflation target of just below 2 percent.
"So did the sell-off in Bunds after the ECB meeting reflect hope of success in reflating the economy? Not at all, given that equities were hurt too," Societe Generale rate strategists said in a note.
Finland, Greece and Ireland are scheduled for rating reviews after the market close, with the focus on Finland, which may drop out of AAA bond indexes if Fitch downgrades it.
Finland's 10-year yields were down 5 basis points, in line with most of their euro zone peers, trading at 0.51 percent.
Italy sells 6.0-7.5 billion euros in three-, seven- and 15-year bonds later on Friday.
(Reporting by Marius Zaharia; Editing by Gareth Jones)