AkademikerPension, a Danish pension fund, announced on Tuesday, January 20th, that it will sell its entire holding of US Treasury bonds, approximately $100 million, by the end of the month.
The move comes amid escalating tensions between the US and Denmark and sheds light on whether the financial market can be an instrument of political pressure.
The decision came with a financial justification: the fund says it is concerned about the trajectory of American public finances. Anders Schelde, investment director, stated that the main reason is the assessment of the fiscal sustainability of the US, and not a political gesture.
Still, he acknowledged that the geopolitical environment between the US and Europe, especially the friction over Greenland, "made the decision easier."
Schelde primarily cited the rising debt burden facing the United States after decades of excessive government spending. The U.S. posted a budget deficit of $1.78 trillion last year, down just over 2% from fiscal year 2024, as Trump's broad and high tariffs took effect.
AkademikerPension manages 164 billion Danish kroner (approximately US$25.7 billion) and says it used Treasuries as part of its liquidity and risk management strategy. Now, it is seeking alternatives to fulfill this role without carrying the risk it has come to see in US Treasury bonds.
The fiscal concern is shared by Moody's Ratings, which downgraded the United States' sovereign credit rating from Aaa to Aa1 in May, citing the budget deficit and the high borrowing costs associated with rolling over debt at high interest rates.
But it is also true that European leaders have reportedly considered, in recent weeks, the use of retaliatory tariffs and other punitive economic measures in response. Some investors have begun to fear that European countries might divest their holdings in US assets in reaction to Trump's new tariffs.
Therefore, the stock of European capital invested in the US could become a point of pressure in an escalation between the historical allies. And the financial market has begun to consider the extent to which politics might influence asset prices as an additional risk.
What Europe has in the US
Data cited by Bloomberg shows that US assets held in the European Union exceed $10 trillion, with significant positions also in the United Kingdom and Norway.
In the event of a sharper deterioration in the transatlantic relationship, there would be room for a reaction that goes beyond tariffs and directly affects the American capital market, with the sale of Treasuries and/or stocks to put pressure on interest rates, the dollar, and financial conditions in the US.
However, this substantial amount is not in the hands of public officials. The majority of these assets are in private hands, outside the direct control of governments.
Even when there are public arms involved (sovereign funds and state entities), any block sale runs into issues of mandate, governance, and, above all, the cost to the European investor, since a large-scale sale would likely reduce prices and worsen the mark-to-market valuation for those who still hold these securities.
But the case of the Danish pension fund shows that some pressure can occur. Although $100 million is far too little to have an impact on its own, it fuels a discussion about foreign appetite for financing the American deficit.
In the view of some financial market participants, the US's net international position is a risk factor for the dollar "only if" foreigners are willing to suffer financially by reducing their positions.
Even if European public sector investors stop accumulating US assets or start selling, "the situation probably needs to worsen" before they accept lower portfolio performance for political objectives.
However, others argue that US dependence on external financing would be a vulnerability in a scenario of disruption to the geoeconomic stability of the Western alliance.
“Hysteria” and a bet on decompression
On the American side, the reaction is to try to defuse the issue. At the World Economic Forum in Davos , Treasury Secretary Scott Bessent stated that talk of a prolonged trade war with Europe is premature and described some of the public reaction as "hysteria."
Bessent also downplayed the chance of Europe using harsher instruments — including the sale of Treasuries — and treated the matter as something that tends to be resolved through negotiation and "working groups," in line with the European bloc's operating logic.
Still, news reports indicate that the European Union is discussing retaliatory tariffs: Reuters reported that European leaders are considering tariffs on €93 billion ($108 billion) worth of American goods, which could take effect on February 6 after a suspension period.
