The performance of German goods producers dropped to its lowest in seven years, a survey showed on Wednesday, adding to a grim outlook for the euro zone's largest economy after the International Monetary Fund trimmed its estimate for German growth this year by 0.1pc.
German 10-year bond yields fell as much as three basis points to a low of -0.39pc, near the record low of 0.409pc reached earlier this month.
Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services that account for more than two-thirds of the economy, fell to 51.4 from 52.6 in the previous month.
That undershot a consensus forecast of 52.3 and was the lowest reading since March, though it remained above 50, the line that separates growth from contraction.
Spanish and Italian government 10-year bonds outperformed after the data, despite political uncertainty in both countries.
Spanish 10-year bond yields were last down 4.5 basis points to 0.347pc. Italian debt of the same maturity fell 8.5 basis points to 1.512pc, approaching a three-year low.
Italy's five-year bond yields were more than 9 basis points lower at 0.764pc, their lowest since May 2018.
The data comes before a meeting on Thursday of the European Central Bank. Money markets are now pricing in around a 40pc chance of a 10-basis-point rate cut by the ECB.
On Tuesday, the International Monetary Fund cut forecasts for global growth this year and next. It kept euro zone growth forecasts steady for 2019, and upped them for next year but trimmed its estimate for German growth this year by 0.1pc and for Italy's 2020 expansion by 0.1pc.
Investors are likely maintain their focus on Italian and Spanish politics.
The fate of Italy's coalition government is uncertain. Rumours are swirling about a meeting between the leaders of the two squabbling parties who make up the coalition, the 5-Star Movement's Luigi Di Maio and League's Matteo Salvini.
Spanish government bond yields moved in line with the broader market, despite Prime Minister Pedro Sanchez' failure to secure support to form a government.
Sanchez, who won the most seats in an election in April but fell short of a majority, has faced three months of difficult coalition talks with Podemos, whose votes he needs to be confirmed as prime minister.
Market expectations of a no-deal Brexit rose after Boris Johnson was elected leader of Britain's conservative party. Johnson has said he will lead Britain out of the European Union on Oct. 31, deal or no deal.