The broad tax-and-spending bill introduced by President Donald Trump has caused foreign investors to lose confidence in U.S. debt because they fear rising inflation and increasing deficits.
The Congressional Budget Office predicts that this legislation will boost the national debt by $3.3 trillion. Moody’s performed a credit rating downgrade of the United States in May because of its doubts about long-term fiscal sustainability.
Tokyo-based fund manager Toshinobu Chiba from Simplex Asset Management has started moving his investments from Treasuries to European and Australian and Singaporean bonds. He expressed his concern about the deficit expansion.
Foreign investors withdrew $14.2 billion from U.S. Treasury holdings during April when Trump introduced his “Liberation Day” tariffs according to U.S. Treasury data. The 30-year benchmark yield experienced extreme fluctuations during May when it reached 5.1% before returning to 4.8%.
The traditional status of Treasuries as a global safe haven has become increasingly unstable because of Trump’s trade and fiscal policies. The growing deficit together with unpredictable tariff policies have introduced fresh risks to dollar-denominated financial instruments.
The changing global bond markets force investors to reassess the stability of U.S. government debt as political and economic uncertainties continue to rise.
