European shares were expected to extend a sharp sell-off which was exacerbated the previous session by the weakest factory activity data from the Philadelphia Federal Reserve in more than two years and sent German, UK and US 10-year yields to record lows.

"With the negative sentiment stemming from the equity universe, there is still potential for the Bund future to mark new highs again," Unicredit strategist Kornielius Purps said.

"There are simply too many factors which are of concerns for investors, be it the business cycle outlook, be it the dollar funding issue with the ECB ... be it risk that rescue package for Greece might fail due to these collateral demands, be it the discussion about transaction tax in Europe."

Bund futures were last up 8 ticks at 135.83. It hit a record high of 136.26 the previous session, entering uncharted territory. Cash 10-year yields were 1.4 basis points down at 2.074 percent.

Copyright Reuters, 2011