The single-day widening of the spread between French and German 10-year government bonds was the largest since June, as European government bonds mostly rose while French bonds lagged behind.

The spread between French and German 10-year government bonds widened by 9 basis points to 127 basis points; the German 10-year government bond yield fell 4 basis points to 3.59%.

The French 10-year government bond yield at one point rose 6 basis points to above 4.87%, the highest since 2002, before slightly retreating to 4.86%.

German government bonds led gains among European government bonds, with the short end performing most strongly.

The German 2-year government bond yield fell nearly 9 basis points to 3.21%, the largest single-day decline since May.

Strategists believe that month-end position adjustments, safe-haven buying, and the market's perception that the European Central Bank is turning dovish all contributed to the bond rally.

Traders lowered their bets on ECB rate hikes over the next year by as much as 10 basis points; they now price in a 100% probability of three rate hikes and a 50% probability of a fourth.

Market: The German 10-year government bond yield fell 4 basis points to 3.59%; German government bond futures rose 23.00 points to 119.84; the Italian 10-year government bond yield was roughly flat at 4.61%; the spread between Italian and German government bonds widened by 4 basis points to 103 basis points; the French 10-year government bond yield rose 5 basis points to 4.86%; the 10-year UK government bond yield rose 1 basis point to 5.42%.