LONDON Germany's 10-year government bond yield fell to its lowest level in almost three months on Tuesday, as warnings about the impact of the Omicron coronavirus variant renewed demand for safe-haven assets.

Drugmaker Moderna's CEO said COVID-19 vaccines were unlikely to be as effective against Omicron as they have been against the Delta version, sparking a new selloff in world stock markets. 

Caution from U.S. Federal Reserve chief Jerome Powell encouraged investors to snap up bonds as they scaled back their expectations for a first rise in U.S. interest rates. In prepared comments to be delivered later on Tuesday to U.S. lawmakers, Powell said the variant posed downside risks to the economy.

The yield on 10-year German Bunds -- regarded as one of the safest assets in the world-- fell to -0.363% and was last down about 3 basis points on the day.

It is down almost 26 bps in November and set for its biggest monthly fall since August, 2019.

News that euro zone inflation soared to its highest rate on record this month on surging energy costs failed to dent the rally in bond prices for now.

"You have this new variant and no one is sure about the severity of the illness," said Lyn Graham-Taylor, senior rates strategist at Rabobank in London.

"The flip side is that if it turns out not be as bad as feared, then we get a big risk on move. So we are in this phase where there will be choppiness until we get more clarity."

Most benchmark 10-year yields in the euro zone fell 2-3 bps.

U.S. 10-year Treasury yields tumbled 11 bps to around 1.42% and trade in money markets suggested investors were pushing back bets on a 25 bps rate hike from the Fed to September 2022 from July next year.

Analysts said with the Omicron variant raising risks for the short-term growth outlook, investors were already looking beyond latest inflation numbers.

Consumer price growth in the 19 countries sharing the euro accelerated to 4.9% in

November, by far the highest level in the 25 years since the figure has been compiled, up from 4.1% a month earlier and well ahead of expectations for 4.5%. 

The European Central Bank is likely to keep buying bonds through 2022 to boost the bloc's economy and could even resume pandemic emergency bond buys after they end in March, ECB Vice President Luis de Guindos told French newspaper Les Echos on Tuesday. (Reporting by Dhara Ranasinghe; Editing by Ana Nicolaci da Costa and Ed Osmond) ((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))