On January 21st local time, U.S. Treasury Secretary Bessent delivered a series of comments at the Davos Forum, addressing issues including the Greenland sovereignty dispute, bond market turbulence, and Federal Reserve independence.
Bessent explicitly warned European nations against enhancing their military presence in Greenland and directly criticized France's proposal for NATO military exercises. He questioned the decision by Denmark and seven other countries to symbolically deploy officers to Greenland, labeling the move "impractical." Targeting French President Macron, he suggested that with the "French budget in disarray," the focus should be more on domestic affairs.
Meanwhile, Bessent attempted to downplay the impact of the issue on financial markets. He described Denmark's holdings of U.S. Treasury debt as "insignificant" and expressed being "not at all worried" about the threat of European countries potentially selling off U.S. bonds. On Tuesday, former President Trump voiced similar confidence, stating he did not believe the EU would abandon its investment agreement with the U.S. over this matter.
Bessent questioned the decision by Denmark and seven other NATO countries to symbolically deploy military officers to Greenland, stating:
"I'm not sure what the purpose of these countries mobilizing troops is. In my view, it's simply fanciful."
He then criticized French President Macron, stating:
"If this is the only thing President Macron has to do amidst the chaos of the European and French budgets, I suggest he focus his energy on other matters beneficial to the French people."
These remarks highlight the ongoing strain in transatlantic relations due to the Greenland issue. The former president has recently intensified his stance, demanding that Denmark relinquish sovereignty over Greenland to allow the U.S. to take control of the territory for national security reasons, even threatening to impose tariffs on eight NATO allies, which has provoked strong discontent among European leaders and prompted considerations of potential retaliatory measures.
Addressing market concerns that European countries might sell U.S. bonds as a countermeasure, U.S. Treasury Secretary Bessent again downplayed the threat. He clearly stated that Denmark's investment in U.S. debt is "insignificant," with a scale of "less than $1 billion," and added:
"They have been selling U.S. bonds for years, and I am not at all worried."
Previously, on Tuesday, Bessent had dismissed talk of potential European bond sales as a "false narrative," emphasizing that this threat, which could significantly impact markets, was unrealistic. Before heading to Davos, the former president expressed similar confidence, believing the EU would continue to honor its investment commitments to the U.S. The former president said:
"They need that deal with us very much. They really do, they have put enormous effort into it."
Concurrently, Bessent expressed concern about the recent sharp volatility in the Japanese government bond market. He noted:
"From what we have observed, Japanese bond prices have experienced a six-standard-deviation move, and this volatility is spilling over into other markets, including U.S. Treasuries. I have been in contact with my counterparts in Japanese economic affairs, and I believe they will take measures to stabilize the Japanese market."
Market data showed that as major Japanese financial institutions signaled large-scale increases in holdings and politicians called for market stability, Japanese government bonds experienced a significant rebound on Wednesday: the 40-year bond yield fell by 20 basis points to 3.99%, and the 10-year bond yield decreased by 5 basis points to 2.290%.
On the matter of Federal Reserve appointments, Bessent criticized Chair Powell for "politicizing the Fed" and expressed uncertainty about his support for Governor Lisa Cook. The U.S. Supreme Court held a hearing today regarding the former president's attempt to remove Cook.
Regarding trade issues, Bessent revealed that no new rounds of negotiations with the UK have been scheduled yet, but he believes the Prime Minister Starmer's government will continue to advance the agreement. He also urged Europe to "break down internal and external trade barriers" to facilitate trade flows.
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