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$116 Bil. May Inflows into Euro Zone Debt Suggests Jitters About US
By Reuters | 21 Jul, 2025

Trump's erratic threats of irrational tariffs and destructive migrant deportations have given foreign investors reason to be concerned for US economic stability.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 11, 2020. REUTERS/Staff/File Photo

Euro zone debt saw nearly 100 billion euros ($116 billion) of buying from outside the bloc in May, Citi said citing European Central Bank data, the latest sign that euro assets are benefitting from a shift away from U.S. markets.

The 97 billion euros of net inflows into euro zone debt with maturities longer than one year was the largest on a monthly basis since at least 2014, Citi said, pointing to portfolio flow data from the ECB.

"This could potentially be due to substitution out of dollar assets," the bank's analysts said in a note to clients on Monday.

Allocation away from U.S. to European assets has been a big theme across financial markets in 2025, so investors are looking for data indicating to what extent such a move is taking shape. 

U.S. President Donald Trump's confrontations with longstanding allies over trade and security, along with attacks on the Federal Reserve, have raised concerns around the safe-haven status of U.S. Treasuries this year. 

Euro zone bonds have traded more steadily, boosting their appeal to investors as an asset perceived to be safe. 

U.S. 30-year yields are up 40 basis points since April 2, when Trump announced his "Liberation Day" tariffs, while German equivalents are up fewer than 20 basis points. 

Citi however noted the May inflows followed 12 billion euros of foreign investor outflows from the bloc's debt in April, which they said could be explained by broad de-risking in the wake of Liberation Day. 

"All in, therefore, we would watch out for the June data, released on 18th August, to draw any conclusions," the analysts said. 

($1 = 0.8592 euros)

(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe and Dale Hudson)