Germany's benchmark borrowing costs fell to the lowest level of the year Friday as investors continued to pile into safe haven assets even as stock markets around the world test all-time highs.
Benchmark 10-year bund yields were marked 3 basis points lower at 0.2% in London trading, the lowest since late December. Yields on the country's 2-year bonds, known as schatz, traded at an all-time low of -0.93%. Data from Reuters indicates the schatz's yield decline is the largest since the European debt crisis of 2012.
Traders are also getting prepared for what many expected will be an increased pace of purchases by the European Central Bank when it begins the extension of its quantitative easing program in April.
ECB President Mario Draghi said in December that the decision to buy €20 billion fewer bonds each month starting in April should not signal "tapering," and instead argued that the extension of the program to December 2017 is an indication of the Bank's intention to establish a "sustained presence" in financial markets for "long time."
Draghi told reporters in Frankfurt that tweaks to the QE program would allow for the purchase of bonds with less than two years of maturity -- a departure from its previous limit -- and that bonds trading with a yield that sits below the Bank's deposit rate (a negative 0.4%) would be eligible for purchase "if necessary."
Gold prices also climbed to the highest levels since the U.S. Presidential elections as investors seek protection from rising political risks in Europe and a pullback in the U.S. dollar.
Spot gold prices were marked 0.5% higher in London trading and changing hands at $1,256 per ounce, the highest since Nov. 11. The gains extend a mid-December rally to more than 11%.
Investors have been unsettled by political developments in Europe, where far right candidate Marine Le Pen continues to gain support in France's upcoming Presidential elections and Germany's ruling coalition fell to second place in opinion survey for the first time in several years.
Markets were further troubled by statements from President Donald Trump, who referred to China as the "Grand Champion" of currency manipulators just hours after his Treasury Secretary, Steven Mnuchin, suggested the government was in no hurry to formally accuse the Chinese of such activity.
Mnuchin also said that the Trump administration's tax plans would likely not be passed into law before the summer and wouldn't have an impact on the world's biggest economy until next year.
The statements trimmed gains for the U.S. dollar index, which traded 0.17% lower in London at 100.80. The index, which measures the greenback's strength against a basket of global currencies, has fallen 3% so far this year.