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Global Investors are largely factoring in a negotiated outcome on the Greenland issue after the World Economic Forum (WEF) summit concludes in Davos, and therefore do not expect a major or long-lasting impact on the US bond market, opines banking and market expert Ajay Bagga.
Bagga said that despite the resurfacing of tensions between the US and Europe over Greenland that has triggered renewed tariff concerns and "Sell America" flows, the situation is still being seen as manageable by markets. "For now, it is still minor," Bagga told ANI. "Most of the market thinks that post-Davos, Donald Trump will come back with some kind of deal where the US may get four or five bases in Greenland, and it won't deteriorate further from that." He added that markets are factoring in the possibility of tensions worsening, but investors believe Europe can stall further escalation if it negotiates firmly. According to Bagga, what is becoming increasingly clear is that Europe will need to significantly raise its own defence spending in response to these developments. The Greenland issue escalated sharply in January 2026 after Trump intensified efforts to acquire the territory from the Kingdom of Denmark, adding to global market uncertainty. Bagga noted that Europe is also expected to actively pursue free trade agreements (FTAs) with countries around the world to reduce its dependence on the US. He highlighted the deep economic ties between the US and Europe, pointing out that the two sides together account for around USD 1.5 trillion in trade, while European and American companies jointly hold about USD 4.7 trillion in assets. He also said investors from Europe have invested heavily in the US, and American investors have significant exposure to Europe. "At a broader level, nearly 80 years of the international order are being potentially questioned," Bagga said, adding that some recent actions, including Trump posting maps showing Canada, Venezuela and Greenland as parts of the US, are unprecedented in international relations. "One doesn't know where the stop will come, but most market analysts believe it will come," he said. Bagga stressed that markets do not expect the situation to deteriorate into a prolonged or intense cold war between Europe and the US. As a result, investors are not anticipating a sustained impact on US Treasuries, which he said will continue to remain the world's largest and most liquid bond market. However, Bagga pointed out that over the longer term, central banks may increasingly look at de-dollarisation at the margins. He noted that over the last four years, central banks have bought around 1,000 tonnes of gold, and this trend is likely to continue. On the euro, Bagga said it is unlikely to replace the US dollar due to structural challenges. (ANI)
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