Some of Australia’s biggest investors say they are cutting their holdings of US Treasuries, citing concerns over President Donald Trump’s tariff and tax plans.
SA, a state-owned fund managing assets equivalent to 30 billion US dollars, has shifted to reducing its holdings of US sovereign debt. Meanwhile, the Queensland Investment Corporation, a state-owned fund with 86 billion US dollars in assets, stated that some of its clients are cutting back on their positions in US Treasury bonds.
Con Michalakis, chief investment officer of Adelaide Funds SA, said that the uncertainty of the US fiscal situation and the fact that US Treasury yields do not adequately reflect the risks of holding these bonds are reducing the appeal of these securities. He said that the proportion of US Treasuries held by the fund manager is currently several percentage points lower than its target allocation.
The shift among Australian investors indicates that President Donald Trump’s attempts to reshape global trade and the US economy are eroding support for “American exceptionalism”. Japan’s largest life insurer is seeking alternatives to US Treasuries, Asian family offices are cutting or freezing their US investments, and the Bloomberg Dollar Index has dropped by more than 7% this year.
Mihalakakis said that Funds SA has taken advantage of its relatively light position in government bonds to shift funds towards US investment-grade and high-yield credit assets and intends to reduce its overall exposure to the US dollar.
“The dollar will fall first. If the fiscal situation deteriorates, the yield curve will become steeper,” he said. “We want to be slightly long on the Australian dollar and hold more non-dollar foreign exchange exposure.”
In April, Trump announced a hike in global tariffs, raising concerns about accelerating inflation and a slowdown in economic growth in the United States. The president is also urging lawmakers to pass a tax and spending bill, which analysts expect will increase the deficit by trillions of dollars over the next decade.
The Brisbane-based Queensland Investment Corporation (QIC), whose clients include some of Australia’s largest retirement funds, said that uncertainty and fiscal trajectory in the US mean that US assets such as US Treasuries will need a higher risk premium than in the past.
Beverly Morris, head of Liquidity Markets Group at Queensland Investment Corporation, said: “We have heard from these investors that the developments over the past few months have led them to reconsider their allocation to the US market, including in fixed income and currency.”
Portfolio adjustments may take months to materialize, depending on the schedule of investment committee meetings, but the tone of the discussion suggests that “it’s a matter of when, not if,” Morris said. She indicated that these investors are considering increasing their holdings of government bonds in Australia, Europe and Japan.
Stuart Eliot, head of portfolio management at AMP Ltd., one of Australia’s largest asset management companies, said in an interview this month that the company has frozen new long-term US investments due to the bill. The Australian sovereign wealth fund Future Fund said this week that the US is becoming a more uncertain investment destination and requires a higher risk premium.
Technical analysis:
Gold: The yellow block alerted by the plugin yesterday performed its task well, sweeping through the liquidity and rebounding significantly. For today, we will continue to adopt the combination strategy of yellow and blue. For detailed positions, please consult the plugin.
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The Nasdaq rebounded from the overnight low after news that Trump has postponed the decision to take action against Iran for two weeks. However, the fundamental issues remain unchanged and the short-term expectation of rate cuts will not increase. Therefore, we maintain the combination of shorting after high liquidity and shorting after a pullback following a break of key support. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: Yesterday, our strategy of breaking through the buy stop with the blue momentum indicator was perfectly executed, achieving a profit-to-loss ratio of around 7 times. For today’s intraday trading, we will maintain the combination of green and yellow indicators. However, please note that it is advisable to conduct short-term operations and hold risk-free positions to get through the weekend. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key economic data and events to focus on:
14:00 German Producer Price Index for May
20:30 Canadian April retail sales
22:00 Eurozone June consumer confidence index flash estimate
