Treasuries Slide as Japan Rout and Greenland Tariff Threats Ignite Global Bond Selloff

• U.S. Treasuries fell sharply, with 30-year yields surging more than 10 basis points intraday to approach 4.95%, marking the highest levels since early September.

• The selloff was triggered by a record-breaking rout in Japanese government bonds, where 40-year yields exceeded 4% amid fiscal concerns, spilling over into global debt markets.

• Geopolitical tensions escalated as President Donald Trump's aggressive push for U.S. control of Greenland, including tariff threats against European allies, revived fears of reduced foreign demand for U.S. assets.

• Analysts highlight a confluence of fiscal deficits, repatriation risks from Japan, and eroding perceptions of U.S. safe-haven status as drivers of steeper yield curves and higher risk premiums.

• While a Danish pension fund's decision to exit Treasuries added symbolic pressure, the move's scale remains minor in the $30 trillion market; upcoming auctions will test demand.

U.S. Treasuries opened under intense pressure Tuesday, extending a global bond rout sparked by turmoil in Japanese debt and fresh geopolitical friction over Greenland. According to Bloomberg, Long-dated yields spiked as investors grappled with mounting evidence that fiscal strains and policy uncertainty are no longer isolated phenomena but interconnected forces reshaping borrowing costs worldwide.

The benchmark 10-year Treasury yield climbed to levels not seen since August, while the 30-year briefly touched near 4.95% before paring gains by midday in New York. The moves came after Treasuries resumed trading following a U.S. holiday, absorbing the full force of overnight developments in Asia and Europe.

Japan's Fiscal Fears Spill Over

At the heart of the turbulence lies Japan, where a fierce selloff in government bonds sent long-dated yields to unprecedented highs. The 40-year Japanese Government Bond yield rocketed above 4% during the Asian session — a record for any maturity in more than three decades — fueled by investor unease over Prime Minister Sanae Takaichi's snap election campaign promising aggressive tax cuts on food and other fiscal easing measures.

This domestic pressure has profound global implications. Japanese investors, traditionally major buyers of U.S. Treasuries due to higher yields abroad, now face compelling reasons to repatriate capital as domestic returns rise. The shift threatens to reduce foreign inflows into U.S. debt at a time when America's own deficits remain unchecked.

"No one is doing a great deal to control fiscal deficits, and when it all comes together with geopolitical concerns around Greenland and European demand for Treasuries, plus the Japanese selloff, yield curves need to be steeper to get the appropriate amount of risk premium," said Dominic Konstam, head of macro strategy at Mizuho Securities USA LLC.

The echoes of earlier volatility were unmistakable. Konstam drew parallels to April's market upheaval following the Trump administration's sweeping tariff announcements, which triggered a sharp selloff in U.S. assets amid fears of eroding foreign appetite.

Greenland Tensions Revive 'Sell America' Fears

Compounding the pressure, President Trump's escalation over Greenland — an autonomous territory of Denmark — injected fresh uncertainty. Trump intensified demands for U.S. control, threatening tariffs starting at 10% on eight European allies and rising to 25% unless an agreement is reached. He even hinted at military options and imposed steep duties on French luxury goods after resistance from leaders including President Emmanuel Macron.

The rhetoric prompted swift backlash. The European Union suspended ratification of a prior trade deal, while a Danish pension fund, AkademikerPension, announced plans to divest its roughly $100 million Treasury holdings by month's end, citing unsustainable U.S. fiscal trends. Though small in the vast Treasury market, the move amplified concerns that European investors — major holders of U.S. debt — might accelerate rotations away from American assets.

"The key new dynamic now is that the U.S. has become the source of uncertainty, not the safe haven from it," said Andrew Ticehurst, senior rates strategist at Nomura Australia Ltd. in Sydney.

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, viewed the yield spike as a market signal unlikely to go unheeded in Washington. "Trump loves to weaponize uncertainty up to the point the markets respond negatively," he said, noting how April's tariff threats prompted partial walkbacks after equities and bonds sold off sharply.

Multiple Forces Converge on Long End

Beyond geopolitics, broader dynamics weighed on longer maturities. Persistent fiscal deficits across major economies have kept debt concerns elevated, with no major player aggressively reining in spending. In the U.S., upcoming Supreme Court considerations on tariff legality and Federal Reserve leadership changes — including potential successors to Chair Jerome Powell — added layers of policy risk.

George Catrambone, head of fixed income at DWS Americas, downplayed the Danish fund's impact as "mathematically lost" in the $30 trillion Treasury universe but identified Japan as the "true accelerant" to the selloff and dollar weakness.

Ian Lyngen, head of U.S. rates strategy at BMO, described the break from a prolonged period of narrow trading ranges as "convincingly bond-bearish." Volatility gauges in currencies ticked higher alongside the bond moves, with the dollar sinking to two-week lows earlier in the session.

Swap spreads for long-dated Treasuries widened, signaling cheaper bonds relative to derivatives, though still far from April's extremes. Treasury Secretary Scott Bessent, speaking at Davos, sought to calm nerves, dismissing notions of aggressive European retaliation through mass Treasury dumping.

Outlook: Auctions and Demand Test Ahead

With a $13 billion 20-year note auction slated for Wednesday, markets face an immediate gauge of appetite for duration amid these crosscurrents. Jim Reid, global head of macro research at Deutsche Bank AG, urged close monitoring of U.S. asset demand as a barometer for policy aggressiveness.

The convergence of a Japanese repatriation wave, unchecked deficits, and transatlantic rifts over Greenland has snapped Treasuries out of inertia. What began as isolated fiscal jitters has morphed into a broader reassessment of risk premiums — one that could steepen curves further if foreign buyers hesitate.