Euro zone debt attracted nearly €100 billion ($116 billion) in inflows from foreign investors in May, marking the largest monthly net inflows since at least 2014, according to Citi, citing European Central Bank data. This surge is a strong indicator that euro assets are benefiting from a shift away from U.S. markets.
The €97 billion of net inflows into euro zone debt with maturities longer than one year highlights a growing preference for European assets. Citi’s analysts suggest that this shift may be driven by substitution out of dollar-denominated assets, especially following concerns over U.S. trade policies and Federal Reserve actions under President Donald Trump.
In 2025, a significant trend has emerged in financial markets: a move away from U.S. assets towards European bonds. U.S. confrontations with allies and rising concerns over the safe-haven status of U.S. Treasuries have prompted investors to seek steadier alternatives. In contrast, euro zone bonds have traded more reliably, making them a more appealing option.
Key Points:
– €97 billion in net inflows into euro zone debt, the highest since 2014.
U.S. 30-year yields rose by 40 basis points since April, while German yields only increased by 20 basis points.
– The May surge follows €12 billion in outflows from euro zone debt in April, likely due to broad de-risking post “Liberation Day” tariffs.
– With continued uncertainty surrounding U.S. assets, euro zone bonds are seeing growing demand as a safe haven. Investors are closely watching for the upcoming June data, which will provide further insights into the direction of these flows.
