Strategists said a decision by US futures broker MF Global Holdings to file for Chapter 11 bankruptcy, Japan's intervention to weaken the yen and the OECD's cuts to global growth forecasts added to the uncertain backdrop.
"There's a general concern about the global factors," said Orlando Green, strategist at Credit Agricole. "People are moving away from riskier assets and towards safe havens."
Market attention now turns to a first estimate of third quarter economic growth in Britain, due on Tuesday, which is expected to show a brief glimmer of light before a slowdown in the fourth quarter.
The country's manufacturing PMI, also due Tuesday, is seen falling to show a stagnation of the sector in October, adding to a recent string of weak economic surveys.
The December gilt future settled 180 ticks higher on the day at 128.34. The equivalent German Bund future also ended 180 ticks higher. Leading British shares fell by 2.4 percent .
In the previous session, gilt futures had settled 23 ticks down on the day at 126.54, the lowest settlement price since Aug. 31, after plumbing as low as 125.82, its lowest level in almost three months.
Ten-year gilt yields fell by 2 basis points to 2.44 percent, narrowing the spread over Bund yields by 1 basis point to around 42 basis points.
European leaders reached a deal last week to try to fix the debt crisis that began in Greece two years ago. However, key questions remain over the details of how the plan will work.
Strategists said investors wanted more clarity on plans to give the euro zone's rescue fund extra firepower and whether China and other countries would offer the bloc their support at the G20 meeting on Nov. 3-4.
"People see it (the euro zone deal) is not a magic panacea for all of the ills the euro zone faces," said Eric Wand, rates strategist at Lloyds Corporate Markets. "Yields on 10-year gilts are edging back towards the lower edge of the range we've seen recently."
Ten-year Italian yields rose above 6 percent -- despite traders saying the European Central Bank was buying Italian and Spanish debt in secondary markets.
The risks to the currency bloc were brought into sharp focus by the OECD, which slashed its 2012 euro zone growth forecast to 0.3 percent from 2.0 percent.
Japan said the euro zone's crisis had fuelled a rise in investors buying the yen in safe haven trades. Japan intervened to sell the yen on Monday for the second time in less than three months after the currency hit another record high against the dollar.
Data showing British mortgage approvals fell and net mortgage lending slowed for the second month running in September had little impact on gilts.