FirstFT: Investors retreat from US Treasuries

Good morning. Today I’ll be covering:

• Investor anxieties about the US Treasury market

• Apple’s supply chain expansion in India

• Trump’s ban on international student enrolment at Harvard University

• And why record numbers of Americans are moving to Britain

Investors are diversifying their bond portfolios away from the US as the country’s growing debt burden and the Trump administration’s trade war erode the appeal of the world’s biggest debt market.

What happened: Donald Trump’s “big, beautiful” tax bill, passed by the House of Representatives yesterday, threatens to sharply increase US public debt. Long-dated Treasuries sold off sharply in the run-up to the passage of the legislation.

The bill would extend the president’s sweeping 2017 tax cuts, which Trump officials have suggested will accelerate economic growth. However, the non-partisan Committee for a Responsible Federal Budget estimates it would increase the debt-to-GDP ratio from 100 per cent today to a record 125 per cent.

Why it matters: Traders worry the US Treasury market will lose its safe-haven status. Fund managers are increasingly eyeing European, Japanese and Australian debt, which offer stronger yields and more optimistic economic narratives.

• Poisoned chalice: The bill risks alienating voters and being seen as a giveaway to the rich.

• Opinion: Trump’s ‘big, beautiful’ budget is spooking investors, writes Gillian Tett.

Here’s what else I’m keeping tabs on today and over the weekend:

• Companies: AJ Bell posts its half-year update.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. Elias Rodriguez, the man accused of killing two Israeli embassy aides in Washington, has been charged with two counts of first-degree murder, the murder of a foreign official and several firearms felonies. The FBI said it was investigating the shooting as a hate crime and act of terrorism. More details here.

• History of Israeli embassy attacks: Yesterday’s shooting was a ‘nightmare scenario’ for a country long conscious that its envoys are a target.

• War latest: Benjamin Netanyahu lashed out at his western allies over their calls for a ceasefire in Gaza in a video released last night.

2. Exclusive: Washington is pushing the EU to unilaterally cut tariffs on US goods, criticising the bloc’s offer of mutual reductions instead of pledging to lower them alone as some other trade partners have done. Trump’s negotiators say that without concessions, the bloc will not progress in talks to avoid additional 20 per cent “reciprocal” duties.

• Picking sides: Malaysia and Singapore are finding it harder to maintain neutrality as geopolitical tensions grow.

3. Exclusive: German Chancellor Friedrich Merz is “actively” backing a proposed EU ban on the Nord Stream pipelines connecting Russia to Germany in a bid to stop any US and Russian efforts to reactivate the gas links. Here’s more on the bloc’s upcoming round of sanctions against Russia for its war in Ukraine.

• G7 summit: Ministers threatened more sanctions against Russia, but made little progress on how to respond to Trump’s trade war.

4. The Trump administration has barred Harvard University from enrolling international students “effective immediately”, in a major escalation of its attacks on one of the US’s most prestigious schools. The decision comes amid a deepening crackdown on elite institutions, which the president accuses of promoting “woke” ideology and failing to tackle antisemitism.

5. Exclusive: Apple’s key contractor is moving ahead with building a $1.5bn component plant in Chennai, further expanding the iPhone-maker’s supply chain in India even as Trump demands it return manufacturing to the US. The new facility would help Foxconn supply its main customer and bolster Apple’s latest tilt away from China.

Join us for a subscriber-only webinar next Wednesday for insights into the most consequential geopolitical rivalry of our time: the US-China showdown. Register now and put questions to our panel.

The Big Read

Drilling companies are now piloting direct lithium extraction from underground brines, a new technology that has been compared to the shale revolution. Can it turn the US into a key player in the battery metals race?

We’re also reading . . . 

• Syria’s gold hunt: In a country ravaged by war and poverty, citizens have emerged from the repression of the Assad regime — and taken up metal detecting.

• Slapdown diplomacy: Public Oval Office altercations with foreign leaders are undermining the US’s global influence, warn policy experts.

• Artificial intelligence: Large language models are unconcerned with truth because they have no concept of it — and therein lies the danger, writes John Thornhill.

Chart of the day

US applications for British citizenship hit a record high during the first few months of Trump’s presidency. “People are leaving because of fear, frustration and financial security”, said Ono Okeregha, director at the law firm Immigration Advice Service.

Take a break from the news

We are getting dumber, writes Simon Kuper, as smartphones sap our attention spans, reading skills and ability to reason. How can you buck the trend? Here are seven habits to live by to become a great thinker.