MW Treasury market faces worst day in 6 months after Trump threatens European allies with tariffs related to Greenland
By Vivien Lou Chen
The yield on the 30-year U.S. government bond was heading closer to 5% on Tuesday in a sign of worry about the impact of tariffs on inflation
U.S. government bonds were taking a beating after President Donald Trump's latest tariff threat against Europe.
Long-dated U.S. government debt was getting slammed on Tuesday as nervous investors reacted to President Donald Trump's plans to slap 10% tariffs on imports from eight European countries beginning next month.
Tuesday's selloff within the $30 trillion Treasury market sent the benchmark 10-year yield BX:TMUBMUSD10Y to an intraday high of 4.3% and on its way toward its highest closing level in five months. The rate on the 30-year bond BX:TMUBMUSD30Y jumped to as high as 4.95% and headed for a closing level not seen in more than four months. At one point, the long bond was also poised for its biggest one-day selloff since July 11, when it sold off on renewed fears about U.S. trade wars with Canada and Europe. Yields and bond prices move in opposite directions, meaning that the former spikes during aggressive selloffs of the corresponding Treasury maturity.
Bonds were one of the most important places within financial markets where investors could express their worries about geopolitical uncertainties and the U.S. inflation outlook on Tuesday. Europe ranks as one of the biggest holders of U.S. government debt: The euro area combined with Belgium, Luxembourg and Ireland held a total of more than $1.5 trillion in Treasurys as of last year.
As a result, European-based market participants were not taking kindly to Trump's latest trade move. Danish pension fund AkademikerPension, for example, was reportedly set to divest its holdings in the U.S. government bond market by the end of the month. "The U.S. is basically not a good credit and long-term the U.S. government finances are not sustainable," Anders Schelde, chief investment officer at AkademikerPension, told Bloomberg on Tuesday.
The U.S. Treasury market tends to reflect "a lot of different views. In times of stress or global concerns, it can act as a lightning rod for the expression of those factors," said Tom Nakamura, head of fixed income and currencies at AGF Investments in Toronto.
Tuesday's selloff was being driven by two main things, he said in a phone interview. The first has to do with concerns about Trump's desire to acquire Greenland from Denmark, which sparked the president's latest threat of tariffs against Europe. These trade concerns were producing near-term worry about economic growth and raising the possible need for easing by central banks, while also leading to long-term fears about inflation and fiscal risks, he said. This was creating a so-called steepening of the Treasury curve, a dynamic in which the difference between short-term and long-term yields widens. The second catalyst for Tuesday's moves was Japan, with investors keeping an eye on whether Prime Minister Sanae Takaichi will be able to deliver a large fiscal boost for the economy.
The U.S. bond market "remains the largest and most liquid" in the world and "is central to a lot of financial-system plumbing," Nakamura said. "While we can have these concerns on the margins, in terms of that role being diminished materially, it is likely to be a long process. We have a long time before we get concerned about a protracted selloff in Treasurys."
-Vivien Lou Chen
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(END) Dow Jones Newswires
January 20, 2026 11:17 ET (16:17 GMT)
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