Support for riskier assets was reflected in a sell-off in core euro zone paper, with Germany's 10-year bond yield rising three basis points to 0.11 percent, having dropped as low as 0.077 percent on Friday. Progress in China-US trade talks had lifted sentiment, analysts said.
Italian two- and five-year bond yields fell over 10 bps each after the Bank of Italy reported a 34 percent year-on-year fall in impaired loans. Net of writedowns bad loans stood at 30 billion euros in December, the lowest level since May 2010.
Bad loans held by Italian banks swelled to 360 billion euros in 2015-2016 following a deep recession and lenders have been working to reduce them in the past two years.
Italian banking stocks rallied almost 1.9 percent.
The boost to Italian bonds from the data came despite pressure from the government on the Bank of Italy and the expectation of early elections, Commerzbank rates strategist Christoph Rieger said.
The Italian/German 10-year bond yield gap narrowed to around 279 bps having edged closer to 300 basis points on Friday.
Demand for core euro zone bonds waned as progress in trade talks between China and the US boosted risk appetite.
In late trade, most 10-year eurozone bond yields were 2-3 bps higher on the day. US Treasury yields also rose as the US session got underway.
The prospect of early elections in Spain had little immediate impact on the Spanish curve. The Spanish/German 10-year bond yield gap was at around 112 bps having briefly widened to almost one-month highs at around 114 bps earlier.