Trump's pressure on the Federal Reserve triggers a rush to safe havens, with two-year German bonds becoming a "safe haven" for capital.

Notice that, due to President Trump's tough stance on the Federal Reserve, investors have been seeking safe havens in Europe, leading to a significant increase in the prices of German short-term bonds. The two-year German bond yield fell by 6 basis points to 1.62%, the lowest level since 2022, while the ten-year German bond yield also saw a decrease. Meanwhile, investors sold off US Treasury bonds on Monday and switched to buying European bonds. In recent weeks, after intense volatility in the global markets, Eurozone bonds have become a safe haven for investors. US Treasuries, usually seen as the ultimate safe haven globally, experienced a sharp decline due to Trump's reform efforts in global trade and pressure on Fed Chair Powell to lower interest rates, shaking market confidence in US assets. Chris Zacharelli, Chief Investment Officer at Aurora Asset Management, stated, "We have seen European investors repatriate their investments in the US in tech giants and US Treasuries. We expect this trend to continue as long as tariff policies and other anti-globalization policies are seriously discussed." On Tuesday, US Treasury futures prices fell, while long-term Treasury futures prices remained virtually unchanged after Monday's significant sell-off. Investors' attention will now turn to the German two-year bond auction scheduled for later on Tuesday an event that typically pushes up yields and highlights strong demand for German bonds. The front end of the German yield curve is particularly attractive as it is expected to benefit from further rate cuts by the European Central Bank. Despite stubborn inflation hindering the Fed's dovish policies, the ECB has outlined a path for further rate cuts following last week's seventh rate cut. On Tuesday, the currency market increased bets on the extent of rate cuts by the ECB, with expectations of a cut slightly above 70 basis points by the end of the year, 5 basis points higher than last Friday's close. Policymakers, including Martins Kazaks, have warned that US tariffs are exacerbating uncertainty and increasing the risk of an economic downturn in the Eurozone.