Treasury prices fell sharply on Tuesday, pushing long-term yields to their highest levels in four months. The selling pressure originated from a rout in Japanese government bonds and was compounded by renewed concerns over US geopolitical friction with European allies regarding control of Greenland.
US bonds opened lower, tracking a fierce selloff in Japanese debt that spilled into global markets. Yields moved even higher after Danish pension fund AkademikerPension announced it would exit the Treasury market by month-end, though the fund holds only about $100 million of US debt. Prices later pared some losses.
The yield on the 30-year Treasury rose more than 10 basis points to nearly 4.95%, its highest since September 3. Yields on five- and ten-year notes also reached highs not seen since August. By mid-morning in New York, trading had settled somewhat as traders assessed the situation.
"The Danish pension fund is symbolic, and I suspect we're back to JGBs having an outsized influence," said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management.
McIntyre added that the spike in yields sends a message to the administration. "Trump loves to weaponize uncertainty up to the point the markets respond negatively," he said, referencing a previous market reaction to tariffs.
The moves followed a US holiday on Monday, with investors reacting to the Japanese bond selloff and rising US-Europe tensions over Greenland. In Asian trading, concern around Japan's fiscal outlook sent yields on the nation's 40-year debt above 4%, a record high, weighing on long-dated debt globally.
"The true accelerant to the Treasury and dollar selloff seems to be Japan, and concern of repatriation from global markets to support higher inflation and JGB yields," said George Catrambone, head of fixed income at DWS Americas.
The selloff ended a period of calm for US bonds. Gauges of expected volatility in currency markets also ticked higher as the US dollar sank to a two-week low.
"The stubbornly narrow yield range in Treasuries has finally broken and it's done so in a convincingly bond-bearish fashion," said Ian Lyngen, head of US rates strategy at BMO, calling it a combination of factors.
A $13 billion sale of 20-year notes scheduled for Wednesday will test demand for longer-dated debt. The transatlantic rift has fueled debate about whether European countries might use their holdings of US bonds as leverage.
"The key new dynamic now is that the US has become the source of uncertainty, not the safe haven from it," said Andrew Ticehurst, a senior rates strategist at Nomura Australia Ltd. in Sydney.
By one metric, long-dated Treasuries were set to cheapen the most in a day since May. Treasury Secretary Scott Bessent, speaking at the World Economic Forum in Davos, urged calm and dismissed suggestions of forceful European retaliation through bond sales.
"It's worth keeping an eye on the demand for US assets as a barometer for how aggressive the US might be on this policy," said Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG, referring to the Greenland tensions.