As the US dollar is no longer a "safe haven," central banks around the world are turning to European bonds

As the dollar's safe-haven status is being questioned, central banks around the world are increasing their allocation to eurozone government bonds.

Data shows that this year, the subscription ratio of official institutions in eurozone government bond issuances has significantly increased, rising from 16% for the whole of last year to 20% so far this year.

Trump's indecision on tariff policies and attacks on the Federal Reserve have raised market concerns about the dollar's safe-haven status. As the world's largest reserve currency, the dollar has fallen 9% this year, while the euro has surged 12%.

Analysts point out that Europe's relative political stability, lower budget deficits, and inflation levels make the region's bonds more attractive to central banks. However, industry insiders emphasize that it is still too early to determine a significant shift in central bank reserve asset allocation.

Official Institutions Significantly Increase Holdings of Euro Bonds, Asian Demand Becomes a Highlight

Barclays' analysis based on data from the Debt Management Office shows that official institutions (including central banks and sovereign wealth funds) have subscribed to one-fifth of the eurozone government bonds issued through syndication this year, up from 16% last year to 20% so far this year.

Germany issued 30-year bonds the day after announcing a historic fiscal policy shift in March, with official institutions receiving 55% of the allocation. In Spain's 10-year bond issuance in May, official institutions also received 27% of the allocation.

Syndicated issuance is a method by which governments sell bonds directly to investors through banks, raising over €200 billion ($232.4 billion) for eurozone governments last year, making it an important financing channel. This issuance method facilitates tracking results and monitoring changes in demand. Bankers involved in bond issuance noted that demand from Asian institutions has been particularly prominent this year and is widely distributed.

Benjamin Moulle, Global Head of Sovereign, Supranational, and Agency Bonds at Crédit Agricole CIB, stated:

"Some Asian clients, especially, are returning to the eurozone government bond market. Large Asian central banks are very confident and more comfortable investing in European government bonds than before."

Moulle pointed out that Europe's political stability, relatively low budget deficits, and low inflation levels make the region's bonds attractive to central banks. Lower inflation provides more room for the European Central Bank to cut interest rates further if necessary.

Significant Shift Not Yet Determined

Although the rising demand for eurozone bonds is a positive signal, bankers emphasize that it is still too early to determine whether central bank reserve managers have meaningfully adjusted their currency allocations due to developments this year.

A banker involved in arranging government debt issuance stated that central banks may be shifting their eurozone bond holdings to longer maturities, as they have not actually purchased long-term bonds in recent years. The banker noted that central banks remain focused on the dollar and typically adjust their asset allocation models at the end of the year, so significant changes have not yet occurred.

Rohan Khanna, Head of Euro Interest Rate Strategy at Barclays, stated:

"It is extremely difficult to determine what the actual situation is. I have had these conversations with sovereign wealth funds from China and Europe, their view is that it is still too early." Khanna stated that while such investors are considering whether to invest the incremental funds obtained outside the United States, they acknowledge that there is no real alternative to the U.S. Treasury market