The spread between French and German 10-year government bonds narrowed after domestic French real money investors, including pension funds and asset managers, bought French government bonds for a second consecutive day.

German government bond yield curves steepened, with mixed moves, as money markets reduced bets on European Central Bank rate hikes, while long-end maturities tracked US Treasuries lower.

The spread between French and German 10-year government bonds narrowed by 4 basis points to 137 basis points, while the spread between Italian and German government bonds held steady at 114 basis points; traders are betting on a 23 basis point ECB rate hike by year-end, down from 25 basis points last Friday.

UK government bond yield curves bear-steepened, moving similarly to US Treasuries; swap markets indicate the Bank of England is expected to raise rates by 22 basis points in November, with a cumulative 37 basis points by year-end.

Markets: German 10-year government bond yields rose 3 basis points to 3.49%; German government bond futures fell 28 ticks to 120.78; Italian 10-year government bond yields rose 3 basis points to 4.63%; French 10-year government bond yields fell 1 basis point to 4.86%; 10-year UK government bond yields rose 5 basis points to 5.42%.