Bonds: German bunds rise most in six weeks as EU slashes inflation outlook

These were the movements in the most widely-followed 10-year sovereign bond yields:

US: 1.79% (-9bp)

UK: 1.53% (-7bp)

Germany: 0.20% (-7bp)

France: 0.56% (-6bp)

Spain: 1.56% (-2bp)

Italy: 1.46% (-2bp)

Greece: Holiday

Portugal: 3.09% (-1bp)

Japan: -0.12% (0bp)

'Deflation' was the watchword at the start of a holiday-shortened trading week following weaker than expected readings on Chinese manufacturing sector conditions over the long weekend and after the Reserve Bank of Australia unexpectedly cut rates.

Adding to those concerns, shortly before noon the European Commission cut its projection for Eurozone-wide consumer price inflation in 2016 from 0.5% to 0.2%.

Against that backdrop, strategists at JP Morgan told clients that Eurozone purchasing managers´ indices were not reaccelerating and the so-called credit impulse from the European Central Bank´s stimulus measures was "weakening".

However, in the same research note the broker said it was now 'overweight' global credit relative to equities.

Gains for French government debt were particularly noteworthy as they came ahead of the sale of €8bn in debt securities the next day.

Further afield, yields on 10-year Turkish government bond yields jumped by 21 basis points to 9.46% after a parliamentary committee decided on Monday it would lift the legal immunity protecting lawmakers accused of having supported the separatist Kurdish PKK party.

In reaction to the announcement, Kurdish lawmakers threatened with the creation of an autonomous parliament.