Market participants said the fall was due to some selling designed to book profits on the recent sharp rise and low liquidity owing to a market holiday in Britain.
"This is some profit-taking after the rally of last week when we reached very high levels. There is some spread tightening today too. Maybe the market is expecting them to provide some bailout money for Spain," said Alessandro Giansanti, strategist at ING in Amsterdam.
Pressure is growing for policymakers to step in to stall a rise in Spanish bond yields driven by fears the cost of bailing out the country's ailing banking sector may be too high without external aid.
Spanish Prime Minister Mariano Rajoy called at the weekend for the euro zone to set up a new fiscal authority to manage the bloc's finances, a move some analysts have interpreted as signalling greater willingness to seek help.
The European Central bank, which has previously acted to calm stressed markets, holds its regular policy-setting meeting on Wednesday. But, with ECB President Mario Draghi keen to keep pressure on EU leaders to resolve the crisis, expectations in the market of further monetary easing were limited.
Bund futures fell 37 ticks to a session low of 145.97, but remained at extremely elevated levels after hitting a record high of 146.89 on Friday.
Last week Bunds futures, whose safety and liquidity appeals in times of crisis, rose more than two points in their sharpest weekly rise in 5 1/2 months. German yields hit record lows across the curve on Friday.
Analysts said the flight to safe-haven bonds was expected to continue until clarity emerged on issues such as Greek elections due on June 17 and the recapitalisation of European banks.
Selling of riskier equities continued as concerns about the US economy deepened after a non-farm payrolls report on Friday showed far fewer jobs were added in May than expected.
"Markets have moved to extremes and mounting global macro worries have joined the anxiety about Spain and Greece. Bunds and (US) Treasuries will remain bid as risk assets are hammered," said Commerzbank strategist Rainer Guntermann in a note to clients.
POLICY OPTIONS
In the euro zone, German Chancellor Angela Merkel has pressed for closer integration, including a central authority to manage finances and sweeping new powers for Europe's political and legal institutions.
However, the long-term plans were not expected to offer much relief for investors fretting over the possibility of a Greek exit from the currency union and the mounting problems in Spain that may require some form of bailout.
"It's not really something the market can work with right now... It seems to be rather symbolic messages that do not change the big picture for now," said Michael Leister, strategist at DZ Bank in Frankfurt.
However, with Spanish yields rising towards unsustainable levels above 7 percent, some in the market were growing wary that policymakers would be forced to act more quickly by providing an external bailout for its banking sector.
"It will come for Spain. They will try to reduce the refinancing cost for Spain because the level of yield is starting to become punitive," said ING's Giansanti.
"In this case I would play for a tightening of spreads in Spain and Italy and reducing the long positions in Bunds."