Highly-rated government bond yields fell on Wednesday as tensions between North Korea and the United States firmed investor demand for so-called safe haven assets.

North Korea said it is considering plans for a missile strike on the U.S. Pacific territory of Guam earlier on Wednesday, just hours after President Donald Trump told the North that any threat to the United States would be met with "fire and fury."

Pyongyang has made no secret of its plans to develop a nuclear-tipped missile able to strike the United States, which it says are a legitimate means of defense against perceived U.S. hostility, including joint military drills with South Korea.

The escalation in rhetoric jarred financial markets as investors sheltered their cash in assets that tend to perform in times of stress.

German and U.S. government bonds, alongside gold and the Japanese and Swiss currencies, were the main beneficiaries.

"Trump's comments about North Korea have created nervousness and the fear is if the President really means what he said: 'fire and fury'," said Naeem Aslam, chief market analyst at Think Markets in London.

"The typical text book trade is that investors rush for safe havens."

Yields on German 10-year bonds - the bloc's benchmark which has the top Triple-A rank by all three ratings firms - fell 2 basis points to 0.456 percent. Yields fall when prices rise.

U.S. equivalents fell 3 bps to 2.25 percent.

Yields on lower-rated euro zone bonds in Portugal, Spain and Italy were flat to slightly higher on the day.

Analysts said demand should remain firm for a sale of 4 billion euros of five-year German bonds at auction.

"Bunds appear stuck in their tight ranges below 0.5 percent for now and should be supported by geopolitics this morning," Commerzbank said in a note.

There was little market reaction to inflation data from China, the world's second largest economy, which showed prices holding steady in July in a positive sign for industrial output and profits for the third quarter.

Despite brightening growth, inflation has been sluggish in major economies including the United States, Europe and Japan, keeping policymakers cautious over tightening monetary policy.