International investors are largely unfazed by European pension funds selling off US Treasury bonds. As long as their significantly larger holdings of US corporate bonds and equities remain intact, this situation is unlikely to change.
At major exchanges and even at this week's Davos forum, a hot topic has been speculation about whether Europe might use US assets as leverage in retaliation for President Donald Trump's interest in Greenland. However, strategists and fund managers indicate that the reality is, aside from operational difficulties, the largest exposure to the US lies in corporate assets, not government debt.
This week's market activity serves as clear evidence. The decision by Danish pension fund AkademikerPension to sell $100 million in US Treasuries caused a stir in markets on Tuesday. Yet, this position is utterly dwarfed by its holdings of over $6 billion in US stocks and corporate bonds. In fact, the $30 trillion US Treasury market has weathered similar ripples before. In recent years, some institutions have withdrawn small amounts of capital, with certain German states making such moves citing environmental, social, and governance (ESG) standards.
"Denmark is keen on ESG, so many funds are likely having similar discussions," said Jordan Rochester, Head of G10 Macro Strategy at Mizuho, commenting on AkademikerPension's decision. Ultimately, they will maintain "a small actual position in US Treasuries."
US capital markets would only face real damage if a major holder, like Norway's sovereign wealth fund, took action on bonds. While this is considered unlikely, any large-scale divestment could have a signaling effect, potentially eroding investor confidence in US assets.
A report from Deutsche Bank highlighted the risk of Europe "weaponizing" US assets, prompting US Treasury Secretary Scott Bessent to personally rebut the idea at Davos, calling such talk "completely illogical." He also downplayed the significance of AkademikerPension's decision.
Bessent told media in Davos that Denmark's investment in US Treasuries was "irrelevant." He stated, "They have been selling Treasuries for many years. I'm not worried at all."
The issue is that pension funds like AkademikerPension, which hold euro-denominated liabilities, often do not choose to hold large positions in US Treasuries. Instead, such funds tend to prefer buying their own national government bonds for fixed-income investments.
So far, a complete exit from all US assets has proven to be an overreaction. Even before Trump announced tariffs on eight countries over the weekend following his Greenland remarks, AkademikerPension's CIO Anders Schelde expressed a similar view, stating that completely divesting US assets would be a "major decision" and pointless given Trump's frequent surprising statements.
"They are essentially cleaning up their books by selling US Treasuries, not US equities and investment-grade credit," said Jack McIntyre, Portfolio Manager at Brandywine Global Investment Management in Philadelphia, characterizing this divestment as "symbolic."
Signal Effect
This does not mean the symbolic aspect is unimportant. AkademikerPension's decision impacted the US Treasury market, and even temporary turbulence indicates investor concern that more institutions might follow suit.
"The signaling effect of this news overshadows its modest economic impact," said Elias Haddad, Global Head of Market Strategy at Brown Brothers Harriman, suggesting US trade and security policy risks a loss of confidence.
As Europe's largest public investor, Norway's sovereign wealth fund holds over $180 billion in US Treasuries. While this figure is substantial, it remains far smaller than its $759 billion portfolio of US equities.
Norway's sovereign wealth fund declined to comment. The country's Finance Minister, Jens Stoltenberg, stated that the $2.1 trillion fund currently sees no reason to withdraw its investments from the US.
If it were Norway's sovereign wealth fund, "that would be a different story," said Gary Pauli, Chief International Investment Strategist at Northern Trust Asset Management, when asked about the Danish fund's divestment. "We are not seeing any change in people selling dollar assets. I'm seeing more interest in dollar hedging."
Meanwhile, according to Dutch central bank statistics, Europe's largest pension sector, the Netherlands' €2 trillion industry, holds just €34 billion in US government bonds. In contrast, its holdings of similar European bonds are nearly ten times larger, and its long-term investments in US corporations and financial institutions amount to a hefty €465 billion.
US data shows that funds within the EU collectively hold approximately $1.8 trillion in US long-term securities, with Norway and the UK holding even larger positions. However, most of this is held privately and may include non-European investors.
Divest America 2.0
Tensions surrounding Greenland might prompt some funds to consider diversifying investments away from the US, citing unpredictable policymaking in Washington and the country's massive fiscal deficits. Pablo Bernengo, CIO of Alecta, said that given increasing macroeconomic risks, Sweden's largest private pension fund has divested most of its US Treasury holdings since early 2025.
Analysts at Barclays, led by Anshul Pradhan, stated that despite rumors, they "have not seen evidence of large-scale selling by overseas investors" since Trump implemented his so-called "Liberation Day" tariffs last April. UBS Group CEO Sergio Ermotti also said on Tuesday that a complete divestment from US assets is "impossible."
"I think one problem with the 'Divest America 2.0' trade is: where is the alternative?" said George Catrambone, Head of Fixed Income at DWS Americas. "Do you really want to make a long-term investment decision based on noise from Davos?"
Brandywine's McIntyre noted that he does see the potential for European funds to reduce exposure to US equities, which could pressure the dollar over time, a trend already visible over the past year. However, this differs from a complete or sudden withdrawal driven by geopolitical fears.
"They might explain it by saying the investment theme is becoming less attractive, which I can actually understand, given the highly concentrated returns in US tech stocks over the past few years," he said.
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