President Donald Trump’s controversial interest in acquiring Greenland has begun to influence market dynamics, spotlighting Europe’s significant position in U.S. capital markets. Recently, there was a notable sell-off in Treasuries, which saw yields rise to their highest levels in over four months. This was attributed to growing “Sell America” fears amidst escalating geopolitical tensions, including Trump’s tariff threats regarding Greenland, which also led to a dip in the U.S. Dollar Index.
According to George Saravelos, Deutsche Bank’s global head of currency research, Europe’s substantial investment in U.S. assets—approximately $8 trillion in U.S. bonds and equities—poses a risk for America, especially as the country depends heavily on foreign investors to manage its debt. Saravelos highlighted that while the U.S. boasts significant military and economic power, it faces a critical vulnerability due to its reliance on external financing. Last year, Danish pension funds began to withdraw some of their capital in response to uncertainties surrounding Trump’s policies, reflecting a growing concern about dollar exposure in Europe.
He noted that with the current geopolitical climate increasingly unstable, European investors might be less willing to maintain their holdings in U.S. assets. This shift could lead to a decrease in their exposure to U.S. dollars, adversely affecting the currency and elevating the appeal of safe-haven assets such as gold.
Adding to the discussion, Pepperstone’s head of research, Chris Weston, indicated that U.S. assets and the dollar are now viewed as carrying a higher political risk premium. He warned that foreign investors might adjust their holdings due to perceived risks, further complicating the capital market landscape.
However, Treasury Secretary Scott Bessent addressed concerns regarding a potential European sell-off of U.S. assets, labeling such speculation as “completely false.” He stated that discussions about European government actions are unfounded and emphasized that the Danish investments in U.S. Treasuries are negligible.
On a positive note, following a meeting between Trump and NATO Secretary General Mark Rutte, the president eased some tensions by retracting his tariff threats related to Greenland, which led to Treasury yields stabilizing. This suggests that dialogue among global leaders might mitigate geopolitical stress and restore investor confidence in U.S. markets going forward.