Much of the focus this week falls on the performance of Spain and Italy in the run up to their first debt auctions of the year, with little sign that investors have started 2012 with improved appetite to buy the countries' bonds.

Markets were expecting few developments to temper the risk aversion from a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy. The leaders will discuss the final details of a deal to increase fiscal coordination in the euro zone.

Bund futures were 11 ticks higher at 138.95 and expected to outperform versus Spanish and Italian debt in the run up to the auctions on Thursday and Friday.