Government bonds are considered one of the USA‘s few Achilles heels. “Sell America” is a means of pressure from the EU. What’s behind it, how realistic it is and whether it’s even necessary.
In the conflict over the US takeover plans for Greenland, a new European strategy has been discussed in recent days: European investors could sell US government bonds and thereby put pressure on the heavily indebted United States. The dispute has now been defused by Trump’s about-face with a view to further tariffs – but the option is still up for grabs.
The US President today threatened the Europeans with vehement retaliation if they sell off US government bonds on a large scale. If this were to happen, the US would respond with a “big counterattack,” Trump told US broadcaster Fox Business. “And we hold all the cards.”
Government bonds as an additional source of income
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Bonds are securities that companies can use to borrow money from investors over the long term. They receive a fixed interest rate every year and the full capital amount is returned at the end of the term. States can also issue or increase bonds, in which case they are called government bonds. In this way, countries take on debt to finance their budgets in addition to tax revenue.
The return on bonds
The effective interest rate on a government bond is called the yield. The duration plays a role. There is more interest on longer bonds because investors are free of their money for longer – with all the risks. However, the interest rate and the price are the most important factors for the return. If a bond is worth 100 euros when it is issued and has an interest rate of three percent per year, the interest is also the annual return – in this example it would be three euros.
However, this assumes that the bond is held until maturity. However, the securities are constantly traded on the market, so the price is constantly changing. If many investors throw them out of the portfolio, the price will fall. For new investors, the return then increases. If the rate falls from 100 to 90 euros, the interest applies to the new rate and the current yield increases to 3.33 percent. Yields and prices develop in opposite directions on the bond market.
The USA is also relying on this – massively. The US national debt is now at a record level of over $38 trillion. “They depend on others to pay their bills through large foreign trade deficits,” wrote George Saravelos of Deutsche Bank in an assessment on Sunday – triggering the current debate. He concluded that the market for government bonds was the “decisive weakness” of the USA.
According to data from the US Treasury Department, which Handelsblatt evaluated, financial players within the EU hold almost 23 percent of all US government bonds – that is, bonds worth more than 2.1 trillion dollars. “We are the largest owner of US government bonds outside the USA and therefore their largest creditor,” says Chris-Oliver Schickentanz from Capitell AG. A sale could be a means “to actually put a stop to Donald Trump.”
Will there be a sell-off?
When many investors sell their government bonds, the price falls. This increases the return for new investors – and tends to also increase the interest rate when issuing future bonds. This would further increase the already high interest burden on the US government and make financing the state and the economy more expensive. In other words, it costs more for the Trump administration to borrow money to finance, for example, the gigantic “Big Beautiful Bill” tax reform.
Calls for “Sell America” are already making the rounds on the financial market. A Danish pension fund announced that it would sell $100 million in US government bonds. However, Finance Minister Scott Bessent believes the concerns are unfounded: “Denmark’s investments in US government bonds are, like Denmark itself, irrelevant.” The investments are low. “I’m not worried at all,” said Bessent. “As finance minister, I see our auctions of government bonds. We are seeing record levels of foreign investment.”
The rating agency Scope also does not expect a large-scale sale. “We believe it is unlikely that European investors would sell US assets in a large-scale and coordinated manner in response to current political tensions,” said Scope analyst Eiko Sievert. This is due to the high proportion owned by private investors. Getting them to sell government bonds in a hurry might not be that easy. The losses and the consequences for the global financial system would be too high.
Concern about the financial situation of the USA
Arthur Brunner takes a similar view and does not expect a sell-off of US government bonds for the time being – especially since they bring a comparatively high return. “What’s more interesting about the Danish fund is the reason for the sale,” said the ICF Bank trader. “There is no direct connection with the ongoing rift between the USA and Europe – but that of course didn’t make the decision more difficult,” explained its manager Anders Schelde. The main reason is poor management of public finances.
So is the USA already creating a “Sell America” effect? US Treasury bonds have served as a security anchor for financial companies and central banks worldwide for decades. This order is currently faltering – without any intervention from Europe. “Investors have their concerns: Before the financial crisis began, the USA was in debt at around 60 percent of gross domestic product (GDP), now it is at 120 percent,” says Brunner. “This naturally raises concerns that at some point the United States will not be able to pay off its debts.”
That is still unlikely at the moment because the USA, as the strongest economic power, still has its options. Nevertheless, the special position of the United States on the financial market as a safe haven is at stake. Scope assumes that the US general government debt ratio will rise to 140 percent of GDP by 2030. Among the industrialized countries, the USA would be the second most indebted country after Japan. In October, the rating agency lowered the US’s credit rating – and not just because of the high budget deficit.
Unpredictable Trump’s politics are a deterrent
“Weakening standards of governance, particularly undermining the established separation of powers, reduces the predictability and stability of U.S. policy,” the agency’s advisory said at the time. For the same reason, a Swedish asset manager announced the sale of US government bonds in the middle of the week. “We have reduced our holdings of US Treasuries in several rounds since the beginning of 2025, and these reductions represent the majority of our holdings,” investment chief Pablo Bernengo told Reuters.
And it’s not just foreign investors who are reacting. “There’s a kind of ‘Sell America’ going on right now. I’ve met with a few asset managers: Global funds are shifting a bit – and withdrawing capital from the United States,” reports investment banker Gary Cohn in an interview with Bloomberg. It was announced at the beginning of the week that Pimco, one of the largest investment companies in the world, was withdrawing money from the USA. The reason is Trump’s “unpredictable” policies, which have led to increased market volatility.
Skepticism is already evident in the bond market
And what happens next? “It will be interesting to see how the players will behave in the auctions of new government bonds,” says Brunner. “The US will have to take on 1.7 trillion in new debt this year.” Not only because of the growing national debt, but also because of the political uncertainty in the USA, investors are likely to continue to gradually diversify their US holdings, according to Scope. There could be “upward pressure on the risk premiums for future bond issues”.
“There is an incredibly high level of skepticism about the USA as a country and as a government apparatus. This is reflected in the US dollar, but also in US government bonds, which are no longer so popular with foreign investors,” says investment strategist Schickenstanz. Government bonds came under pressure this week. The yield on 30-year securities was 4.92 percent on Tuesday, just under the five percent mark.
What happens next also depends on the progress of the Greenland conflict, says Schickentanz. “If Donald Trump plays hardliner here and is unwilling to compromise, this trend will continue. Then we will see a weaker dollar, a stronger euro and then we will probably also see higher long-term interest rates in the USA.” There will probably not be a sell-off of US government bonds for the time being – but the US’s Achilles heel is still affected.
