Global government bond yields tumbled to fresh lows on Tuesday as deflation fears boosted demand for haven assets.

The yield on the 10-year U.S. Treasury note fell to 1.964% compared with 2.038% on Monday. It marks the lowest closing since May 2013 and the first time the yield closed below 2% since that month.

The yields on the 10-year government bonds in Japan and Germany settled at record lows of 0.295% and 0.45%, respectively. The yield on the 10-year U.K. government bond fell to 1.581%, the lowest level since 2012.

Strong demand for haven bonds underscores uncertainty over the global growth outlook, even as the U.S. economy has gained traction and the Federal Reserve ended its monthly bond buying in October.

Lower bond yields translate into higher prices and carry some benefits for the economy. Lower bond yields mean lower mortgage rates, a boon for homeowners looking to refinance their home loans at lower rates, and lower rates on other loans to consumers and businesses.

At the same time, falling yields are apt to squeeze banks, which profit by pocketing the spread between the rates they pay depositors and those they collect on loans.

Investors entered the new year continuing to grapple with multiple threats to the global growth outlook. The eurozone's economy has been stagnant, and Japan's economy is in recession. China's economy has been slowing from the torrid pace of a decade ago, while the economies in Brazil and Russia have been buffeted by falling commodity prices.