Italian bond yields were 7-10 basis points higher on the day in the wake of data showing Italian manufacturing activity contracted for the fourth month running in January and at its sharpest rate since 2013.

Italy's 10-year bond yield was last up 10 bps at 2.69 percent.

"There is a lot of chat about the technical recession and what that means for budget deficit slippage," said Rabobank rates strategist Lyn Graham-Taylor. "The PMI data adds to the economic gloom and has raised concern that the budget deficit will be worse than thought and that has spooked the market.