Trump Pauses Tariff Threat, But Nordic Capital Flight Signals Deepening Bond Market Cracks

Global risk appetite staged a recovery on Thursday after President Trump suspended planned tariffs on eight European nations, citing a “future framework” agreement regarding Greenland. The de-escalation triggered a relief rally in equities and stabilized the US Dollar (USD). However, beneath the calm surface, a structural shift in capital flows is emerging: major Nordic pension funds are accelerating their exit from the US Treasury market, citing fiscal irresponsibility and political unpredictability.

• Support Level: USD stabilizing above 98.70
• Treasury Yields: 10-year hovering near 4.25%
• Economic Impact: Potential 0.2% to 0.5% loss to Eurozone GDP avoided.

The Geopolitical Pivot

The immediate catalyst for market stabilization was Trumps reversal on the “Greenland or Tariffs” ultimatum. Following talks with NATO Secretary General Mark Rutte, the threat of 10-25% tariffs on nations including Germany, France, and Sweden was shelved. This walked the market back from the edge of a trade war that analysts at Goldman Sachs warned could have shaved 0.2% to 0.5% off Eurozone GDP.

The pivot allowed the USD to stabilize above 98.70, while EUR/USD faced renewed pressure as the immediate need for a hawkish ECB defense dissipated.

The Nordic “Exodus”

Despite the diplomatic thaw, a quiet rebellion is brewing in the sovereign debt markets. High-profile Nordic institutional investors are voting with their feet, liquidating US debt positions.

• Alecta (Sweden): The country‘s largest private pension fund confirmed it has sold the “vast majority” of its US Treasury holdings since early 2025.
• AkademikerPension (Denmark): Announced plans to completely clear its $100 millionUST position by month-end, with CIO Anders Schelde explicitly labeling the US fiscal path “unsustainable.”
• SISA Pension (Greenland): Is currently debating a total exit from US equities as a “symbolic resistance” to US territorial pressure.

This trend represents a critical challenge to the “Dollar Exception” narrative. While the immediate tariff threat has passed, the damage to the perceived safety of US assets appears to be festering. Deutsche Bank analysts noted that while “weaponizing capital” is rare, the erosion of trust among Europe’s long-term asset allocators could lead to structural steeper yield curves in the US.

Market Outlook

Investors are now pivoting to the release of the US Core PCE price index to gauge the Federal Reserve's next move. With 10-year Treasury yields hovering near 4.25%, the market remains fragile. The divergence between short-term political wins and long-term fiscal credibility is widening, suggesting that while the Dollar may hold ground tactically, its strategic footing is becoming increasingly slippery.

Technicals

• USD Support: 98.70
• 10-Year Treasury Yields: 4.25%