London. German bonds extended gains, driving benchmark yields to the most negative on record, as investors sought safety in sovereign debt amid global trade tensions, faltering growth and Italian political risks.

Demand for bunds, perceived to be among the world’s safest assets, remains buoyant even after yields tumbled below zero this year. The securities extended gains Friday after US President Donald Trump vowed to impose tariffs on Mexican goods. Ten-year German yields dropped three basis points to minus 0.206%, breaching the previous low set in 2016, when Brexit and European Central Bank stimulus were the main market drivers.

As recently as at the start of the year, few investors had foreseen yields falling even lower than the 2016 troughs given that the ECB has long stopped pumping money into the Euro-area economy, while the US interest rates were raised seven times over the last two years. But the ongoing trade conflict between Washington and Beijing has reignited concerns over global growth, while Italy’s growing deficit has spurred demand for haven debt in Europe.

“It is entirely plausible that the entire German curve becomes negative-yielding,” said Peter Chatwell, head of European rates strategy at Mizuho International Plc. “One needs to be thinking of where the ECB deposit rate could go to in the next easing cycle, how much quantitative easing the ECB might do — all of this is fantastically bullish for bonds.”

Furthermore, bunds still offer a favourable yield pickup for US-based investors, when hedged for currency swings. While 10-year Treasuries currently pay around 2.16%, German equivalents still offer almost 3%, when adjusted for foreign-exchange differentials.