Thirty-year bond yields in Germany and France rose 4-5 basis points each in a second straight day of sharp rises. .

Worries about a bitter trade war and recession risks have pushed investors into even longer-dated bonds in recent weeks.

But a US decision to hold off from imposing import tariffs on Mexico at the end of last week has brought some relief to world markets, lifting stocks.

Speculation about US rate cuts has also bolstered sentiment in stock markets.

France's 30-year bond yield was trading at 1.09pc, almost six bps above more than 2-1/2 year lows hit last week.

"It clearly points towards very lop-sided positioning that is being washed out," said Christoph Rieger, head of rates and credit research at Commerzbank, referring to the rise in longer-dated bond yields.

"And that started yesterday where a correction was triggered by modest risk on."

European stocks were broadly firm and US stock futures pointed to gains on Wall Street later on Tuesday.

Still, analysts viewed the move in bonds as a "correction" rather than a change in trend for a market that has seen huge fund inflows this year as investors brace for an increasingly bitter trade war and its repercussions for the world economy.

And some 10-year euro zone bond yields edged lower, keeping recent lows within sight, in a sign that investor pessimism remains entrenched.

US President Donald Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks with China's president at a Group of 20 summit later this month.

Germany's 10-year bond yield dipped to minus 0.22pc - holding near last week's record lows. Dutch 10-year bond yields remained in negative territory.

"You have to be long globally on fixed income," said Said Haidar, chief investment officer at Haidar Capital.

"That move is not done yet. The global data just keeps on going down."

Elsewhere, there was some focus on Friday's spike in a key overnight benchmark rate used by European banks to lend money to each other.

The Euro Overnight Index Average (EONIA) was fixed at minus 0.25pc on Friday, its highest fixing since late 2017 when it last spiked up, before coming back down at Monday's fixing.

Commerzbank's Rieger said the fixing spike can be explained by record low volumes and occurred in the run-up to Monday's holiday in Germany.