Markets steadied following yesterday’s shake-out. Japanese government bonds rebounded, dragging other sovereigns up, while the slide in stocks and the dollar paused. One outlier is gold, which continues to hit fresh record highs underpinned in large part by ongoing geopolitical uncertainty, BBH FX analysts report.

Treasury sell-off headlines rattle, impact limited

"The world is shifting from a unipolar to a multipolar world making global politics more contested and crisis prone. Interestingly, Canadian Prime Minister Mark Carney highlighted yesterday that the rules-based international order is undergoing a 'rupture, not a transition' where 'great powers have begun using economic integration as weapons. Tariffs as leverage. Financial infrastructure as coercion. Supply chains as vulnerabilities to be exploited'. Gold benefits in this new world order as it’s free from direct links to the economic policy of any country, resistant to crises, and retains its real value in the long term."

"Yesterday, Danish pension fund AkademikerPension said it would sell off its holding of US Treasuries, worth about $100 million by month-end because of 'the poor US government finances'. The signaling effect from that news overshadows the benign underlying economic impact. As a whole, Denmark’s holding of US long-term Treasuries accounts for 0.10% of total foreign holdings and 0.03% of total Treasury securities outstanding."

"As we argued in yesterday’s daily strategy note, the idea that the Eurozone can weaponize its Treasury holdings if trade tensions with the US escalate is completely overblown and not credible. Nevertheless, over the longer term, loss of confidence in US trade and security policies, combined with political interference with the Fed’s independence threaten to accelerate the dollar’s declining role as the primary reserve currency. That’s a structural drag on USD."