Bond yields in Europe and Asia have fallen to zero or even lower on fears that the spread of the delta variant will derail the global economic recovery.

On Wednesday, Italian two-year bond yields fell below minus 0.5% of ECB deposit rates for the first time. The entire yield curve of German bunds turned negative this week, while the yield on Japanese 10-year bonds fell to zero for the first time since December.

Bonds rose this week as the global surge in COVID-19 cases stimulated safe-haven demand. Government bonds in the US, Europe and Japan were also boosted by expectations that major central banks would keep easing.

"the uncertainty caused by the epidemic has led to a drop in global bond yields," said Makoto Yamashita, chief economist at AU Jibun Bank Corp. Local investors may be reluctant to buy bonds with yields of 0 per cent or less, but "they may turn to longer-term bonds for higher spreads."

At 10:08 London time, the yield on Italian two-year bonds was at-0.499%. The decline in Italian two-year bond yields intensified after Martins Kazaks, the ECB's governing board, said the September meeting was too early to decide whether to extend or scale back its epidemic-resistant bond purchase programme.

His remarks also weighed on German 30-year bond yields, which at one point fell to minus 0.021 per cent. This sent German bond yields below zero across the board for the first time since February.

In japan, the yield on the benchmark 10-year bond fell 1.5 basis points on Wednesday, falling further from its February high of 0.175 per cent. In Tuesday's trading session, 10-year Japanese government bonds were not traded for the first time since June 1.