Bunds slipped in early trade after President Obama made a counter offer to Republicans on Monday that included a major change in position on tax hikes for the wealthy, which saw European shares approach fresh highs for 2012.
"The negotiations on the "fiscal cliff" appear to be progressing much more constructively," said Monument Securities strategist Marc Ostwald.
At 0842 GMT, the March gilt future was 28 ticks lower at 118.00, while the equivalent Bund was 13 ticks lower on the day.
Investors prepared themselves for a slew of British data releases, including inflation numbers on Tuesday at 0930 GMT.
Economists polled by Reuters expect inflation to have eased in November from a five-month high hit in the previous month.
Minutes from the Bank of England's last policy meeting will be released on Wednesday and a revised estimate of third-quarter GDP is due on Friday.
"Today sees the start of a hefty data slate to be absorbed prior to the festive break," said Lloyds strategists.
"Although punctuated by Wednesday's BoE minutes, these inbound numbers should provide additional steer on what is still a difficult environment," they added.
Ten-year gilt yields rose 2.5 basis points to 1.91 percent, with their spread over equivalent Bund yields 2 basis points wider at 53 basis points.
"With the market well into festive mood, data releases and, of course, the US fiscal cliff negotiations can provide sufficient excuse for some limited and very short-term positioning in the market," said Lloyds strategists.
Center>Copyright Reuters, 2012