LONDON, Nov 30 Reuters -- Germany's 10 year government bond yield fell to its lowest level in almost three months on Tuesday, as warnings about the Omicron coronaviruses variant renewed demand for safe-haven assets.
Moderna's CEO said that COVID-19 vaccines were unlikely to be as effective against Omicron as they were against the Delta version, sparking a new selloff in world stock markets.
Caution from the U.S. Federal Reserve chief Jerome Powell encouraged investors to snap up bonds as they scaled back their expectations for a first rise in U.S. interest rates. Powell said that the variant posed downside risks to the economy in prepared comments to be delivered later on Tuesday to U.S. lawmakers.
The yield on German Bunds, regarded as one of the safest assets in the world, fell to 0.363% and was down about 3 basis points on the day.
It is down almost 26 bps in November and set for its biggest monthly fall since August, 2019.
The euro zone inflation soared to its highest rate on record this month on surging energy costs, which didn't dampen the rally in bond prices for now.
Lyn Graham-Taylor, senior rates strategist at Rabobank in London, said: "You have this new variant and no one is sure about the severity of the illness.
If it turns out not as bad as feared, we get a big risk on the move. We are in this phase where there will be choppiness until we get more clarity. Most of the 10 year benchmarks in the euro zone fell 2 -- 3 bps.
U.S. 10 year Treasury yield fell 11 bps to around 1.42% and trade in money markets suggested investors were pushing back bets on a 25 bps rate hike from the Fed to September 2022 from July next year.
With the Omicron variant raising risks for the short-term growth outlook, investors were already looking beyond the latest inflation numbers, according to analysts.
Consumer price growth in the 19 countries sharing the euro increased to 4.9% in November, the highest level since the figure was compiled in the last 25 years, up from 4.1% a month earlier and well ahead of expectations for 4.5%.
The European Central Bank is likely to keep buying bonds through 2022 to boost the bloc's economy and possibly resume panic emergency bond purchases after they end in March, ECB Vice President Luis de Guindos told French newspaper Les Echos on Tuesday.