A rally for European stocks and the euro ran out of steam on Friday, with markets focused on debt talks between Greece and its private creditors that may prove the trigger for the next leg of the euro zone's debt crisis.
German government bond futures also fell, however, as expectations a deal would be reached grew, albeit cautiously.
After a positive week of news around the debt crisis -- several successful debt auctions and signs of further action from policymakers -- the crucial talks in Athens, designed to help avoid a chaotic default, looked to be progressing well.
Two days into the restarted talks, which had broken down over a disagreement over what return the debt-ravaged country would offer on new debt, Greece's finance minister said the atmosphere of the discussions was good.
Those comments helped underpin a further reversal in the flood of demand for safe-haven bunds, although the lack of firm news will keep markets tense for a move in either direction.
It looks like they are going to push some sort of Greek deal through but whether that's the end of it I'm not convinced, one bond trader said.
The euro fell to $1.2952 versus the dollar, after earlier hitting its highest level since January 4, while Bund futures fell as much as 42 ticks in early trade to 138.54, a near 2-1/2 week low, before trimming losses.
European stocks edged higher initially before turning negative, after rallying for four straight days, with the FTSEurofirst 300 <.FTEU3> down 0.2 percent to 1,044.69 points in early trade.
That followed another strong session in Asia, with Japan's Nikkei index <.N225> closing at its highest in over two months and Asia-Pacific shares outside Japan <.MIAPJ0000PUS> up 0.6 percent.
(Additional reporting by Emelia Sithole-Matarise and Neal Armstrong; editing by Patrick Graham)