Even the go-to safe haven of US Treasury debt featured in the market divergences caused by Trump’s attempts to decouple the world’s largest economy from globalisation.
 

Soon after Liberation Day, Treasuries sold off sharply as yields surged by 40 and 50 basis points on 10- and 30-year maturities respectively. This marked an unfamiliar divergence in global government bond markets, as high US yields contrasted with muted reactions in Japanese and UK sovereign markets and declining long-term yields in Germany and Switzerland.
 

This divergence is puzzling. Several factors could explain what drove it, including the rumoured unwinding of Treasury holdings by highly leveraged investors needing to raise cash. Additionally, China might have sold US debt in retaliation to escalating tariffs on its exports. Although China's exposure to US government debt has decreased over the past decade, it remains significant enough to cause market volatility if reduced further.
 

The trade war is also testing global investors' willingness to hold US assets (and therefore finance US deficits). The unpredictability of US policy raises questions about the dollar's role as a reserve currency and may accelerate the diversification of international holdings among central banks. 

In this scenario, Bunds could emerge as alternative safe-haven assets to US Treasuries. The trade war, combined with the need for strategic autonomy in Europe, reflect an increasingly fragmented global order, in which increasing divergence in behaviour between US Treasuries and German Bunds may become the norm.

read also: hedge funds: the move away from portfolios built for globalisation