Treasuries Join Global Bond Slide as Tariff Angst Grips Markets

(Bloomberg) — Treasuries fell as President Donald Trump’s tariff threats over Greenland dimmed the allure of US assets and also sparked concern they’d add to inflationary pressures.

Longer maturities led losses, with the 30-year yield rising six basis points to 4.909% as trading of the securities resumed following a US holiday on Monday. Trump’s plan to impose levies on selected European nations as part of a bid to acquire Greenland has revived questions about the unpredictability of his policies and their desirability for global investors.

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The decline in Treasuries deepened after Japanese bonds tumbled due to pushback over Prime Minister Sanae Takaichi’s election pitch to cut taxes on food. Japan’s 30- and 40-year yields both surged more than 25 basis points. Australian and New Zealand debt also dropped along with German bund futures.

“The US administration’s actions have undermined the allure of holding Treasuries somewhat as a haven asset, and that ‘uncertainty factor’ is partly showing in rising yields,” said Prashant Newnaha, a strategist at TD Securities in Singapore. “Markets expect Trump to juice markets ahead of the mid terms, and the tariffs are inflationary.”

Global bonds have started the year on the back foot after rounding off their biggest annual gain since 2020 as investors demand higher yields to compensate for persistent inflation and rising government borrowings. Trump’s latest tariff threats risk worsening price pressures and may add to concerns about fiscal slippage.

Treasuries are losing some of their haven appeal in the wake of swollen US deficits and geopolitical tensions that undermine confidence the world’s biggest bond market can still offer reliable protection when risk sentiment sours.

European countries hold trillions of dollars of US bonds and stocks, some of which sit with public sector funds. That’s fueling speculation they may offload their holdings in response to Trump’s renewed tariff war, potentially driving borrowing costs up and equities down given US reliance on foreign capital.

“The key new dynamic now is that the US has become the source of uncertainty, not the safe-haven from it,” said Andrew Ticehurst, senior rates strategist at Nomura Australia Ltd. in Sydney.

What Bloomberg Strategists Say…

“The fracturing of globalization looks to be accelerating, which underscores concerns about increased debt sales to fund spending on defense, welfare and energy infrastructure. In an era when central banks look reluctant to take cash rates much lower, government securities aren’t being treated like they offer shelter from geopolitical storms.

— Garfield Reynolds, MLIV Asia Team Leader

Adding to pressures around Treasuries is growing concern that Japanese investors will sell their holdings to repatriate funds as yields rise back home, a trend that may jolt Treasury yields even higher.

“My primary concern is that yields on JGBs have reached levels that make investing in US Treasuries unattractive on a currency hedged basis,” Ronald Temple, chief market strategist at Lazard Asset Management, wrote in a note. “If JGB yields continue to rise, a rational choice by Japanese investors could be to move capital back to Japan to benefit from higher yields than can be obtained in the US or Europe net of currency-hedging costs.”

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