De-dollarisation and shifting safe havens

[SINGAPORE] Donald Trump’s second term as US president has reasserted America’s economic might with a mix of bombast, brinkmanship, and a brand of economic nationalism that is as familiar as it is destabilising.

The recent passage of expansive tax reform has raised serious questions about US debt sustainability; the Congressional Budget Office projects a deficit of US$1.9 trillion for this fiscal year alone, with federal debt forecast to climb to 118 per cent of gross domestic product by 2035.

Moody’s downgrade of the US credit rating to Aa1 is not just a symbolic fall from grace; it marks the twilight of the era of “risk-free” US Treasuries. Elevated yields at the long end of the yield curve reflect investor anxiety over the sheer scale of US refinancing needs.