The epicenter of instability has undoubtedly been the tariff war promoted by Donald Trump, which has reconfigured the dynamics of international trade and has put in check the confidence of investors in bond markets.
In these first five months of 2025, the performance of fixed income globally has been marked by a mixture of volatility and uncertainty that reflects geopolitical tensions, the adjustment of monetary expectations and fiscal imbalances that persist in some economies. The epicenter of instability has undoubtedly been the tariff war promoted by Donald Trump, which has reconfigured the dynamics of international trade and has put in check the confidence of investors in bond markets.
In the United States, treasure bonds have lived a true earthquake. The reduction of credit rating at the end of April has caused investors to demand greater returns to compensate for the growing risk. 30 years have exceeded 5% levels for the first time since 2007, while the yield curve continues to show signs of a possible recession. Fiscal uncertainty, fueled by the expansion of the deficit following the aggressive tariff policy, has generated a marked deterioration in the perception of American sovereign debt.
Japan, meanwhile, has seen how the yields of their bonds have climbed to unpublished levels in the last fifteen years, reflecting the end of the era of negative rates and the growing fear of inflationary takeoff. Inflationary pressures, derived from salary increases and the expectation of greater energy costs for the tariff war, have forced the Bank of Japan to leave behind the ultra -expansive policy that characterized the last decade. This has turned Japanese bonds into an unexpected competition for American treasure titles, displacing capital flows and reconfiguring the global map of fixed income investments.
In the European Union, the situation is somewhat more nuanced. The reference bonds, especially the Germans, have registered an increase in their yields, partly as a reflection of the monetary standardization of the European Central Bank and the pressure involved in the increase in energy by commercial tensions. However, the region has benefited from its relative fiscal solidity and the perception of lower credit risk compared to the United States, which has sustained demand for its debt and has avoided that an episode of mass sales will be unleashed.
Argentina, on the other hand, has starred in a shy return to the markets with the issuance of a bonus in pesos of 1,000 million dollars, which showed a very high yield close to 30%. This exorbitant yield highlights the still delicate fiscal and financial balance of the country, despite the efforts of the Government of Javier Milei for restoring the confidence of the markets through a drastic fiscal adjustment and a new agreement with the IMF. The perception of risk remains very high, but investors seem willing to explore selective opportunities in the Argentine debt, waiting for lighter signs of sustainability.
Martin Pelletier, senior in corporate finances, reinforces the idea that international investors have not completely sized the magnitude of this silent crisis that is brewing in the bond market. The lack of awareness about latent risks – since the selective default until the loss of credibility of the great emitters – could trigger even more extreme volatility episodes in the short term.
In sum, the global fixed income market is being shaken by a rearrangement of expectations and the resurgence of tax and geopolitical fears. The tariff war launched by Trump has put in check the sustainability of US debt, while Japan and the European Union cautiously navigate to a scenario of greater monetary standardization. Argentina, in turn, tries to reintegrate into markets with sidereal yields that reflect both risk and opportunity. For investors, the message is clear: times of careful selection and rigorous evaluation of fiscal and geopolitical perspectives in each region are coming.
Financial Analyst
Source: Ambito
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