Treasury yields inch lower as investors monitor escalating trade tensions

• The benchmark 10-year Treasury yield dropped over 2 basis points to 4.27% after topping 4.3% on Tuesday, while the 30-year yield fell to 4.896%
• Danish pension fund AkademikerPension announced it is divesting $100 million in U.S. Treasurys due to concerns about poor U.S. government finances
• European leaders condemned Trump's tariff threats as 'outrageous' and are considering countermeasures, raising concerns that the U.S. may no longer be seen as a reliable trading partner

Summary: Treasury Yields Decline Amid Escalating U.S.-Europe Trade Tensions

Key Market Movements:

U.S. Treasury yields retreated Wednesday following Tuesday's sell-off that triggered a flight from U.S. assets. The benchmark 10-year yield fell over 2 basis points to 4.27% (after reaching 4.3% Tuesday). The 30-year bond declined 2 basis points to 4.896%, while the 2-year note dropped 1 basis point to 3.584%.

Trade Tensions:

President Trump announced tariffs on eight European allies starting at 10% on February 1, escalating to 25% by June 1. The tariffs are linked to demands for a Greenland deal with Denmark. European leaders have condemned the move as "extortion" and are considering countermeasures against the U.S.

Market Implications:

The escalating trade conflict has sparked concerns about a potential "sell America" trade, where investors may:

• Apply higher risk premiums to U.S. investments
• Dump U.S. assets due to perceptions of America as an unreliable trading partner

Notable Development:

Danish pension fund AkademikerPension announced it is divesting its $100 million U.S. Treasury holdings, citing "poor government finances." Chief Investment Officer Anders Schelde noted the U.S.-Europe rift facilitated the decision. Treasury Secretary dismissed the move Wednesday, calling Denmark's Treasury investments "irrelevant."

Bottom Line:

Rising trade tensions with European allies are testing investor confidence in U.S. assets, potentially signaling broader concerns about America's role as a stable trading partner and safe-haven destination for global capital.