Safe-haven US Treasury futures rose 2/32 to 130-9/64 in European trading hours, holding on to gains made in the previous session following the bilateral meeting.

"Attention is really focused on European issues, particularly the outcome of the Franco-German summit which was, frankly, a bit of a disappointment for the markets," said Nick Stamenkovic, strategist at RIA Capital Markets in Edinburgh.

"Nothing substantive was announced in terms of policy initiatives, particularly on the EFSF (European Financial Stability Facility) and a potential new euro zone bond issue."

The absence of a move to increase the size of the euro zone rescue fund and continued efforts to cool expectation of a common euro zone bond was seen as negative by investors looking for a comprehensive plan for tackling the crisis.

Yields on 10-year US debt remained around 5 basis points below those on German bonds as the backdrop of weak global growth and a shaky euro zone outlook sustained investor demand for low-risk US Treasuries.

Focus should switch back to the US as economic data releases pick up in the coming days with investors still keen to gauge how well the world's largest economy is performing.

US producer price data later in the day and Thursday's consumer price index figures will be watched, but market impact should be dampened with the Federal Reserve committed to keeping interest rates low over the longer term.

"I don't think guys will want to position massively into the PPI or CPI... Even if these numbers come in higher or slightly lower, the market is still looking at the overall macro point of view that the Fed's not raising rates any time soon," a trader said.

Ten-year Treasury yields slipped 0.5 bps on the day to 2.218 percent while short-dated yields were 0.5 basis points higher at 0.19 percent.

Copyright Reuters, 2011