Concerns about the German economy and the government shutdown in the United States, as well as the threat of a new election in Greece, added to the bid for safe haven assets across the bloc and 10-year bond yields fell as much as five basis points.
Asian and European shares led the fall on Monday after China's exports unexpectedly fell the most in two years in December.
For an interactive version of the below chart, click here https://tmsnrt.rs/2SRopIf.
After a muted start, the bid for safe haven euro zone bonds gathered momentum, tracking a move by U.S. Treasuries in which 10-year yields fell 3.4 basis points to 2.66 percent .
Germany's 10-year government bond yield, the euro zone benchmark, fell three bps 0.207 percent, lower on Friday's close but bolstered by new supply last week.
Matt Cairns, a rates strategist at Rabobank, said that signs of weakness in Europe's hitherto strongest economy were also driving down Bund yields.
Data on Monday showed euro zone industrial output fell in November by more than expected.
"What is also feeding in is some discussion that there may be additional tax cuts required to prop up the German economy," said Cairns. "The possibility that the European Central Bank can engineer higher rates...is really failing."
Legislators from Chancellor Angela Merkel's Christian Democrats (CDU), meeting at the weekend, discussed introducing new tax cuts when the governing coalition reviews its work towards the end of this year, the party's leader said.
Annegret Kramp-Karrenbauer, who succeeded Merkel as party leader late last year, told Welt television that tax cuts should be used as stimulus to pre-empt a possible downturn. Earlier, Finance Minister Olaf Scholz had said there was space for tax cuts if the economic outlook darkened.
German data has disappointed of late, pointing to a slowdown in economic growth which ECB policymaker Ewald Nowotny said on Saturday could be a lasting phenomenon caused by structural problems, particularly in its car industry, rather than a one-off.
Investors are also poised ahead of Tuesday's Brexit vote.
The future path of Britain's exit from the European Union is uncertain as parliament is likely to vote down Prime Minister Theresa May's deal on Tuesday. Possible outcomes include a last-minute deal, a disorderly exit, a new referendum or remaining in the bloc.
The threat of new elections in Greece meanwhile kept upward pressure on its bond yields with its 10-year government bond yield two bps higher at 4.30 percent.
Greek Prime Minister Alexis Tsipras on Sunday said he would call a confidence vote in his government after his coalition ally quit, depriving him of a parliamentary majority and raising the possibility of a snap election.
Greece is expected to bring a new syndication to market soon but further political uncertainty and any rise in yields may skewer its chances of a new deal in the short term.
(Reporting by Virginia Furness; additional reporting by Thomas Escritt in Berlin; Editing by Alison Williams and Jon Boyle)
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