Sina Finance reported on January 3 that after the US air strike caused the death of Iran's top commander, geopolitical tension suddenly heated up, and Iran's supreme leader vowed “severe retaliation.” Global bonds have soared, driven by safe haven buying.

US 10-year Treasury yields fell to their lowest level since December 12, and German and British treasury bonds rose. Earlier, US President Donald Trump ordered air strikes against Iraq, and Qassem Soleimani was killed in the air strike. Now, money market investors' expectations for the probability that the Fed will cut interest rates in January 2021 have risen to nearly 100% from 80% on Thursday.

“The tense relationship between the US and Iran has not evolved into a substantial escalation recently, but even if this crisis ends in a very positive outcome, the buying of US and German treasury bonds should continue until at least next week.” ING Groep NV senior interest rate strategist Antoine Bouvet said.

As of 10:33 London time, 10-year US Treasury yields fell 6 basis points to 1.82%. German and British 10-year treasury bond yields also fell 6 basis points to -0.28% and 0.74%, respectively. The yield on Australian 10-year Treasury bonds fell 9 basis points to 1.25%.

“If the situation escalates further, the risk aversion trend may be strengthened,” said Marco Meijer, senior fixed income strategist at BNP Paribas.