[MARKET ANALYSIS] Fiscal concerns weigh on JGBs and German debt rises amid haven flows

• UST Futures initially gapped higher as risk-off flows dominated the open following the rising trade tensions over Greenland. However, USTs have fallen lower in the presence of light volumes ahead of MLK Day.
• Bund Futures outperforms their US and Japanese counterparts as US markets close for a holiday and JGBs remain underpressure as fiscal concerns arise. This makes the German paper a clear market for investors to seek safety amid the rising US-EU trade tensions.
• JGB Futures slump as fiscal concerns lift yields to record highs. This comes following reports that both the LDP and the newly-formed Centrist Reform Alliance plan to suspend or cut the sales tax, which increases the risk of fiscal expansion.

The market is witnessing a pronounced risk-off sentiment due to rising trade tensions, particularly impacting Japanese Government Bonds (JGBs) which are under pressure from fiscal concerns. German Bunds are outperforming as investors seek safety, reflecting a shift towards lower-risk assets amid growing apprehensions about U.S.-EU relations. This dynamic suggests a heightened demand for safe-haven assets and could signal broader implications for global bond markets and risk sentiment in the coming sessions.