French government bonds advanced, outperforming German bunds, with the yield spread between 10-year French and German debt narrowing by 9 basis points to 128 basis points.

As oil prices declined, market risk appetite strengthened for a third consecutive day.

Last week, the 10-year French-German yield spread had widened to as much as 159 basis points, the largest since 2011, driven primarily by budget and fiscal concerns.

The Italian-German bond spread narrowed by 8 basis points to 105 basis points, while Brent crude fell 2% to $98.35 per barrel.

Boosted by the drop in oil prices, UK gilts also gained, outperforming German bunds but lagging behind US Treasuries.

Market snapshot

German bund yields fell 2 basis points to 3.48%; German bund futures rose 19 ticks to 120.92; Italian 10-year bond yields dropped 8 basis points to 4.54%; the Italian-German spread narrowed 7 basis points to 107 basis points; French 10-year bond yields declined 9 basis points to 4.77%; and 10-year UK gilt yields fell 4 basis points to 5.38%.