Eurozone bond yields rose on Monday as investors sold safer assets on the receding risk of a British no-deal exit from the European Union and in the belief that the UK parliament could soon approve a Brexit agreement.

Optimism over Brexit negotiations after the EU and Britain agreed a new deal last week has fueled a selloff across euro zone bond markets, as some sort of resolution to Brexit would help tame a key uncertainty facing both the euro zone and British economies. Analysts said Brexit would remain the dominant driver for euro zone bond markets until economic data released later in the week, including flash purchasing managers' index surveys.

The deferral of a vote on the withdrawal agreement in the UK parliament on Saturday has reinforced optimism, as lawmakers forced the government to seek a delay to the Oct. 31 deadline for Britain's leaving the EU.

The British government will now need to push on with legislation needed for ratification of the Brexit deal, after the parliamentary speaker halted the government's attempt to hold a vote on the deal on Monday. Natixis rates strategist Cyril Regnat said media reports suggesting Johnson could get his deal passed were encouraging investors to buy riskier assets and hurting euro zone bonds.

Benchmark 10-year German government bond yields extended their rise on Monday, gaining as much as 4 basis points to -0.34%, close to three-month highs.

Given the scale of the bond market sell-off since the first signs of a Brexit deal emerged - with Germany's 10-year bond yield rising 21 bps since Oct. 10 - analysts expect any further rise in yields if a Brexit deal is approved to be limited.

Commerzbank rates strategist Rainer Guntermann said he saw yields rising up to 5 bps as an immediate reaction if a deal is approved, as "most of the Brexit excitement is in the price now".

Italian bonds underperformed on Monday, with the 10-year yield up 6 basis points. The European Commission sent a letter to Italian authorities asking for clarification over its 2020 draft budget and Rome will reply by Wednesday.

Investors are also preparing for European Central Bank President Mario Draghi's final policy meeting on Thursday, although no significant policy shifts are expected following the announcement of a stimulus package at the last meeting.