July 2025
Fixed Income Monthly Report
Chris Edmonds
President, Fixed Income & Data Services, ICE
Reports of U.S. assets’ demise appear greatly exaggerated
The first six months of 2025 proved a rollercoaster for global fixed income markets, but as we move into the second half, we take a closer look at the much written about migration of investors out of U.S. assets.
The narrative is broadly known, but bears repeating. Global equities and fixed income sold off sharply in the days following the announcement of major new U.S. import tariffs on April 2. As the measures were postponed or otherwise relaxed over the following three months, total returns on the ICE BofA US Corporate Index and the ICE US Treasury Core Bond Index recovered to pre-tariff levels by late June. U.S. equities reached all-time highs in late July, even as the rhetoric from the White House on a new wave of tariffs became increasingly bellicose.
Despite this rebound, news stories that investors are rotating out of U.S. assets and into international developed market alternatives persist. But does the data support this?
We looked at effective yields on seven of ICE’s developed market sovereign bond indices between May 2024 and July 2025 to see if we could glean any insights into recent fixed income investor behavior - focusing in particular on the period since the U.S. tariffs were announced on April 2.
It’s important to stress how much market noise is embedded within government bond yields, reflecting a myriad of economic factors. These including sovereign creditworthiness, national debt burdens, economic growth data, long-term inflation expectations, global economic conditions and expectations for central bank monetary policy.
Central banks in the advanced economies were consistently cutting interest rates during our 13-month observation period: European Central Bank (ECB) rates halved from 4% to 2%, while the Federal Reserve and the Bank of England both shaved 100 basis points off their target rates to bring them down from 5.25% to 4.25%.
This is necessary context because fixed income investor demand is just one of a multitude of factors influencing bond yields. As such, when looking at Figure 1, it is important to bear in mind the larger backdrop of the falling interest rate environment influencing U.S. and Eurozone bonds.
Mindful of that caveat, does the data provide evidence of investors shunning U.S. Treasuries? Not really. In mid-July 2025, effective yields in the ICE BofA US Treasury Index were well below levels from a year earlier (when Fed target rates were 100bps higher), but not materially higher than prior to the U.S. tariff announcement on April 2.
Yields on Treasuries dropped 19 basis points in the two trading sessions immediately following the tariffs announcement (likely attributable to an investor flight to the safety of U.S. debt), then traded around 15-20 basis points higher than the April 2 level in the 10 weeks that followed, before dropping markedly in late June. This is hardly evidence that investors are shunning U.S. government bonds.
Figure 1. Effective yield on seven ICE government bond indices, 5/31/2024-7/10/2025
Source: ICE Indices
Checking the other side of the trade, a flood of investor cash into Eurozone bonds - combined with falling ECB rates - might be expected to contribute to driving yields lower as buyers snap up euro-denominated debt. But that’s not what the data shows.
Eurozone bond yields have indeed fallen over the past 13 months, and they have fallen in the period since April 2 - but only after they experienced a sharp spike on March 5, following Germany’s announcement that it would spend an additional €500 billion over the next 12 years on infrastructure and defense spending.
Anticipation of massive future debt issuance by Europe’s largest economy immediately drove up borrowing costs across all the major Eurozone nations. Figure 1 shows that the reaction to the German announcement was much more pronounced across European bond yields than the scarcely notable dip after the U.S. tariffs were unveiled on April 2.
In the weeks since April 2, we’ve seen Eurozone yields fall, but only back to their levels prior to the German spending announcement. In fact, Eurozone yields have been trending up since the end of June, which is hardly indicative of investors clamoring to buy European bonds.
Focusing on a single noisy datapoint like effective yields can only tell us so much, but Treasury auction results also suggest continued robust investor demand for U.S. debt. While it’s true that there were a string of auctions in April and May that saw lackluster participation,1 2 3 auctions for Treasury securities of maturities all along the curve have seen consistently strong demand since June and into July4 5 - and this includes auctions that have taken place subsequent to the signing of the deficit-deepening One Big Beautiful Bill on July 4.6 7
Given this combination of positive data points, it seems safe to say that reports of the demise of U.S. assets have been greatly exaggerated.
- Financial Times: US Treasuries drop for second straight day after weak demand at $58bn auction, April 8, 2025
- MarketWatch: Treasury auctions and trade uncertainty are keeping bond investors on edge, May 5,2025
- Reuters: Tepid demand for US Treasury auction shows investor jitters about tax bill, deficit, May 21,2025
- Barron’s: 10-Year Treasury Auction Was Strong Again in Positive Sign for U.S. Assets, June 11, 2025
- Barron’s: 30-Year Bonds Rally. Auction Was Solid, but Not Great, June 12, 2025
- Barron’s: Auction of 10-Year Debt Sees Strong Reception, Pulls Rates Lower, July 9, 2025
- Bloomberg: US Treasuries Settle Mixed After Solid Auction of 30-Year Bonds, July 10, 2025
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