The European Central Bank is expected to raise interest rates on Thursday for the first time since October 2008.

"ECB-type speculation is going to dominate," said a trader.

"A rate hike is priced in so it's more the accompanying comments about the future. The risk is that we start factoring in another rise around June or July."

June Bund futures were 16 ticks higher at 121.16.

Two-year bond yields were 1.2 basis points lower at 1.815 percent, with 10-year yields down 1.6 bps at 3.363 percent.

There was little respite for the euro zone periphery with Fitch cutting Portugal's credit ratings by three notches to BBB- late on Friday, one notch above junk, and signalling further downgrades are likely.

Meanwhile, traders said Spanish Prime Minister Jose Luis Rodriguez Zapatero's decision not to seek a third term in 2012 elections would raise questions over Madrid's future commitment to economic reforms.