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The risk premium between German and Italian 10-year yields tightened to 170 bps - the lowest since Sept. 21.

Money markets have also nearly fully priced 100 bps of rate cuts in the euro zone next year.

Based on the rate implied by futures markets, they are pricing for around 70 basis points' worth of cuts over 2024, compared with expectations for 80 bps of easing a week ago.

While most other Wall Street majors view the Fed as likely done with raising rates, Barclays still expects another 25 bps hike in January.

Two-year Treasury yields dropped 22 bps overnight and were mostly steady through Asia trade at 4.84%.