Euro zone bond yields dip as oil prices extend decline

Markets are also focused on central bank action elsewhere this week, with the Bank of England, Bank of Japan and Federal Reserve all due to make their latest interest rate decisions.

Wednesday's Fed decision will be watched especially closely. While expectations are still tilted towards rates staying steady, market pricing for a policy increase has picked up in recent days and a growing number of major brokerages are warning that policymakers could raise rates.

Euro zone bond yields retreated for a third straight session on Tuesday, as optimism about a diplomatic resolution to the Iran war and easing oil prices soothed short-term inflation worries.

Germany's 10-year government bond yield DE10YT=RR, the benchmark for the euro zone, was down by less than one basis point at 3.1192%. Last week, it hit 3.2118%, its highest level since 2011.