Encouraging Chinese data suggested the world's second-biggest economy may be starting to stabilise thanks to ramped-up stimulus from Beijing, bringing some relief to world markets.

China's economic growth slowed to 6.2% in the second quarter from a year earlier, the weakest in at least 27 years. Separate data showed the country's industrial output and retail sales beat forecasts.

That followed stronger-than-expected economic data in Europe and the United States last week, prompting investors to dial back some of their more pessimistic views on the global growth outlook.

"The whole movement in bonds lost steam last week," said Norbert Wuthe, a rates strategist at Bayerische Landesbank. What we saw was a taming of market expectations for European Central Bank easing, and also the ECB calmed expectations for new QE (quantitative easing)."

Germany's benchmark 10-year bond yield was down just a basis point at minus 0.25%, edging off Friday's 3 1/2-week high but still about 16 basis points above record lows reached earlier this month.

It is also back above its June 18 lows, when comments by ECB President Mario Draghi sparked expectations for monetary policy easing soon.

Most 10-year euro zone bond yields were 1 to 2 bps lower in early European trade.

"(German) Bunds and U.S. Treasuries remain nervous as improving hard data on both sides of the Atlantic render the global easing case less clear-cut and revive (inflation) break-evens," analysts at Commerzbank said in a note.

In Italy, the closely watched gap between 10-year Italian and German bond yields was 4 bps tighter at around 194 bps after DBRS on Friday maintained Italy's sovereign credit rating at BBB (high).

The ratings agency cited progress with the country's banks to improve credit quality and the government's commitment to stricter fiscal strategy.

Sentiment towards Italian bonds has improved this month after Rome avoided EU sanctions over its fiscal position and as expectations grew for a return to ECB asset purchases.