LONDON: Euro zone government bond yields held around record lows as poor economic data from Asia kept the onus on central banks to provide stimulus to kick start the global economy.
Japan's second-quarter economic growth fell short of expectations while Chinese activity slowed in July, with investment growing at its slowest pace since the turn of the century, data out on Friday showed.
Chinese stocks jumped to a seven-month high amid speculation more stimulus would be forthcoming, further dimming the allure of top-rated euro zone bonds. Ten-year German Bund yields edging up to minus 0.16 percent.
A Sunday Times report citing UK government sources as saying Britain's exit from the European Union may not take place before the end of 2019 also added to the uncertainty.
"Prolonged uncertainty is damaging for both the UK and euro zone economies. Markets have so far been able to shrug off bad economic news but the longer the Brexit process remains in limbo the harder it will be to ignore," analysts at Mizuho International said in a note.
Spanish and Italian yields held steady. Portuguese 10-year yields, however, rose 2.2 bps in early trading to 2.75 percent before falling back.
The country faces a review by Fitch Ratings later this week, which could put the spotlight on its rating and eligibility for the European Central Bank's quantitative easing programme.
"Fitch should reiterate its take on Portugal. However, hawkish comments may raise concerns about DBRS's stance on which QE-eligibility rests," Commerzbank strategists said in a note.
Portugal's debt is currently rated as junk by the three main ratings agencies (Ba1/BB+/BB+ by Moody's/S&P/Fitch); it remains eligible for quantitative easing only because of a BBB rating from DBRS.
No euro zone government bond issues are due this week, and this could prove supportive for bonds.
Spain's People's Party is due to vote on Wednesday on whether to accept a reform pact from centrist party Ciudadanos.
A vote in favour would take acting Prime Minister Mariano Rajoy another step close to forming a government and ending an eight-month political deadlock.
Also on Wednesday the US Federal Reserve is due to release minutes from the July meeting and the ECB will follow suit the day after, which should give markets some guidance on what course monetary policy will take in coming months.
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