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Since the return of Donald Trump to the White House uncertainty about US financial policy has caused concern as US debt continues to rise.

Those concerns have been visible on financial markets as US bond yields have climbed, an indication that investors are worried about the sustainability of the debt of the world’s top economy.

Those concerns have also affected the dollar, which as the global reserve currency has usually been seen as a safe haven currency. Foreigners have to purchase dollars if they want to buy US bonds, which have also been seen as one of the safest assets in times of volatility.

The US dollar lost more than 10 per cent during the first half of the year, its worst performance since 1973.

The US Treasury raises funds by issuing three types of debt instruments: short-term bills, medium-term notes and long-term bonds. They carry a face value but are sold at a discount, with that price helping determine the yield, or rate of return for investors.

Higher yields indicate investors are demanding a higher rate of return to hold US debt, which can be an indication about concern over whether they will eventually be repaid.

The yields on 30-year US bonds rose above the symbolic level of 5.0 per cent in May, but have since retreated to around 4.8 per cent.

‘Most of the concerns stem from the ‘One Big Beautiful Bill’, the law supported by the White House that includes measures to prolong tax cuts brought in by Donald Trump during his first term,’ said Gregoire Kounowski, an investment advisor at asset manager Norman K.

‘If the text remains unchanged it would add three to four trillion dollars to the US debt,’ he added.

The bill faces a final vote in the US House of Representatives Thursday after squeaking through the Senate on Tuesday.

When Moody’s cut the United States’ top triple-A credit rating in May it cited rising levels of government debt and the impact of the interest costs on the US budget.

‘It was a warning signal for markets and put the trajectory of US debt in the centre of concerns,’ said Raphael Thuin, head of capital market strategy at Tikehau Capital.

US debt now totals more than $36.2 trillion according to the US Treasury, or 120 per cent of annual economic output.

About $29 trillion of that are bonds that the Treasury sells on markets to investors: principally banks, pension funds and foreign governments.

Foreign governments currently own $9 trillion in US debt, with Japan, Britain and China the top holders.

China had until March been either the top or the second-largest holder of US government debt.

Since the US-China trade war in 2020 during Trump’s first term in office, ‘China has gotten rid of US debt in favour of gold. It didn’t sell its bonds but it didn’t replace those that matured,’ said Aurelien Buffault, an asset manager at Delubac AM.

The rest of the world buys US debt as they want to hold a solid dollar-denominated asset.

The size of the US debt market also makes it attractive to investors.

‘It is about 20 per cent larger than the European sovereign debt market in terms of capitalisation,’ said Guy Stear, head of developed markets research at Amundi.

That makes it easier to buy and sell US debt quickly.

US debt has until recently also benefited from being considered a ‘safe haven’ investment as the US government was seen as a reliable borrower.

However, since April investors have started to pass over US debt and the dollar when seeking safe haven assets, noted Stear.

In the current environment, ‘investors are looking for alternative safe havens, that is, a currency and assets that protect them when volatility and increased uncertainty,’ said Imene Rahmouni-Rousseau, director general of market operations at the European Central Bank.

‘It is precisely the euro and European government bonds that have played this role of protective shield’ and ‘for the first time since the 2011 financial crisis European financial markers are considered very attractive by investors’ globally, she opined.