The German Bund future hit a fresh record high of 137.04, up 40 ticks on the day.

Asian stocks fell overnight and European stocks were set to open lower after data on Friday showed US employment growth ground to a halt in August, fuelling concerns that the US economy could fall back into recession. .

"Data seems to be weakening, the debt crisis situation is not getting any easier in Europe," a trader said.

Europe faces a string of political and legal tests this week that could hurt efforts to resolve the debt crisis and increase pressure for governments to try more radical solutions. .

There are concerns over Italy's ability to agree measures to bring its public finances under control. Economy Minister Giulio Tremonti promised on Sunday to meet Italy's budget commitments after the European Central Bank stepped up pressure for action by the struggling centre-right government. .

Investors will scrutinise the ECB'S monthly meeting this week and ECB President Jean-Claude Trichet's press conference on Thursday for any insight into the monetary authority's thinking on the latest developments in the euro zone debt crisis.

Peripheral bonds are likely to come under renewed pressure.

Copyright Reuters, 2010