What began as another round of aggressive rhetoric from United States President Donald Trump has now soured into a full-blown repricing of risk, debt and credibility across the world’s biggest economies.
What we’re currently witnessing isn’t a technical wobble; it’s a warning shot to Trump.
At the centre of the storm sits Washington, with Trump threatening to slap tariffs on European allies — explicitly tying trade punishment to support for U.S. control of Greenland — that have dragged markets straight back into trade-war mode.
However, this time, investors didn’t wait around for policy details; they sold first and asked questions later.
U.S. Treasurys, long treated as the planet’s safest asset, were dumped aggressively with long-dated yields surging toward levels that historically force political U-turns.
The move wasn’t subtle with the 30-year yield barrelling toward the psychologically charged 5% mark, while the benchmark 10-year broke out of its long slumber.
When bonds sell off like this, markets aren’t just nervous, they demand compensation for chaos.
Europe didn’t escape the furore with German bunds, French OATs, Italian debt and UK gilts all moved sharply higher in yield.
This serves as a synchronised reminder to Trump that fiscal indulgence plus geopolitical brinkmanship is a dangerous dance.
Britain now holds the unenviable title of the highest long-term borrowing costs in the G7, a stark symbol of how quickly “developed market safety” can erode.
Then along came Japan, and that’s where things turned from uncomfortable to dangerous.
Japanese government bonds, especially at the long end, were blown out of the water.
Forty-year yields hit record highs as investors priced in looser fiscal policy, stubborn inflation and political uncertainty ahead of snap elections.
But the reverberations reach far beyond Tokyo, given that Japan isn’t just another bond market.
It’s the single largest foreign holder of U.S. government debt, and when Japanese yields rise, the incentive to recycle capital into U.S. Treasurys evaporates.
In other words, money that once flowed outward suddenly has a reason to stay home.
That’s the nightmare scenario for Washington with higher domestic borrowing needs, fewer foreign buyers, and rising yields feeding directly into mortgages, credit costs and equity valuations.
The bond market is effectively saying, you want to weaponise uncertainty - that’s dandy, but you’ll have to pay for it.
Meanwhile, the political optics are looking progressively ugly.
A Danish pension fund announced it will exit U.S. Treasurys, a small move in dollar terms, but symbolically, the ramifications are huge.
Europe, America’s largest external lender, is openly debating retaliation, and analysts are now openly questioning whether the U.S. can continue to rely on foreign capital while antagonising the very partners funding its deficits.
This is happening against a brutal backdrop of global government debt towering above economic growth, rising defence spending pressures, while no major economy is showing serious discipline on deficits.
Bonds, which once absorbed this quietly, are no longer willing sit on their hands.
Meanwhile, U.S. and European stock markets slid sharply as investors dusted off the old “Sell America” playbook — dumping U.S. assets, bidding up gold and silver, and pushing the dollar lower.
Unsurprisingly, officials are urging calm, with Treasury Secretary Scott Bessent accusing critics of overreacting.
Markets rightfully disagree; with history clearly showing that when yields spike this fast, politics eventually blinks.
It happened after earlier tariff shocks, and it can happen again, but only if leaders recognise the dangerous game they’re playing.
