Against that backdrop, investors are expected to snap up 10-year and 50-year Austrian bonds and Dutch paper maturing in 2033 at auctions this session, as they seek relatively safe alternatives to lower-yielding German bonds.

"We think the market has underestimated the impact of the Greek elections. We couldn't be any longer of Bunds if we tried," said a trader. "In Spain, we are looking for a full bailout with conditions at some stage."

German Bund futures were flat at 143.90, after rallying in the previous session as Spanish debt came under pressure.

Market players are concerned over the impact the bailout of up to 100 billion euros could have on Spain's sovereign yields, potentially further pressuring its already stretched finances.

Investors could well opt to pile into 10-year German debt at a sale on Wednesday before the Greek parliamentary election, which will likely be decisive for the country's membership of the euro.

As a worst-case scenario should Athens decide to leave the euro, European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls.