Euro zone government bond yields lagged behind US Treasuries, which dropped sharply after data releases on Friday, sending the spread between German and US borrowing costs to its lowest level since early April, reports Reuters.
US job growth weakened in August while the unemployment rate increased, confirming that labour market conditions were softening, boosting bets on Federal Reserve rate cuts.
Stronger economic prospects and expectations of "higher for longer" policy rates slowed the decline in euro area yields.
Money markets priced in 70 basis points of Fed monetary easing by December, implying two 25 bps cuts and an 80per cent chance of a third move, from 60 bps before economic figures.
They also indicated a 25 bps rate cut in September, along with a 10per cent chance of a 50 bps move - up from zero before the data release.
Germany's 10-year bond yield, the benchmark for the euro zone bloc, fell five bps to 2.67per cent. It hit 2.80per cent on Tuesday, its highest level since March 26.
The benchmark 10-year US Treasury yield dropped 10 bps to 4.08per cent, narrowing the yield gap between US and German borrowing costs to 141 bps, its lowest since April 7, when a sharp selloff in US assets started.
Ultra-long euro zone borrowing costs dropped late this week ahead of US data, after hitting multi-year highs.
Expectations of rising debt levels have strengthened the case for a higher risk premium on longer-dated bonds.
Yields on 30-year German bonds fell four bps to 3.30per cent. They reached 4.434per cent on Wednesday, their highest level since summer 2011.
Germany's 2-year yields, more sensitive to expectations for European Central Bank policy rates, fell three bps to 1.93per cent.
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