LONDON: German Bund yields plumbed record lows on Tuesday as anxiety about Greece's future in the euro zone and concerns about global growth drove demand for assets perceived as safe.
Greek anti-austerity party Syriza is leading polls ahead of a snap election on Jan. 25, and has pledged to renegotiate the terms of Greece's 240 billion euro bailout from the European Union and International Monetary Fund.
A report on Saturday said the German government believes the euro zone could cope with a Greek exit, fuelling uncertainty about the future of the single currency bloc.
Yields on German Bunds, which benefit from flight to quality in times of market strain, fell 3 basis points to an all-time low of 0.484 percent while US 10-year yields dipped below 2 percent for the first time since mid-October.
"Until we see results from the elections there will be a lot of uncertainty ... and that will continue helping demand for higher quality assets," said Christian Lenk, a strategist at DZ Bank.
There was no trading in Greek assets on Tuesday due to a public holiday.
Speculation that the European Central Bank will begin fully-fledged money printing, a process known as quantitative easing (QE), has driven Bund yields to record lows across the curve.
Some analysts believe the ECB will announce QE at a Jan. 22 policy meeting.
The 30-year Bund is now yielding just 1.22 percent , 40-60 bps less than yields on 10-year Italian and Spanish bonds.
Euro zone inflation is predicted to turn negative for the first time since 2009 when preliminary December data comes out on Wednesday, after German inflation fell to just 0.1 percent, piling pressure on the ECB to launch monetary stimulus.
The relentless drop in oil prices, which have fallen by more than half since the summer, is also driving fears about disinflation in the euro zone.
Spanish and Italian 10-year yields were flat on the day at 1.60 percent and 1.83 percent respectively, with the prospect of ECB stimulus limiting fallout from Greece.
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