Investors spooked by the upheaval caused by President Donald Trump’s trade tariffs are likely to gradually shift away from US Treasuries, according to the co-head of Germany’s debt agency.

“The political uncertainty is not appreciated,” Tammo Diemer told reporters on Monday in Frankfurt. “When US Treasury bonds mature, portfolio managers will ask themselves whether they still need to be in dollars or whether their weight has shifted to another currency.”

The haven status of US debt was called into question earlier this month after Trump unleashed a barrage of tariffs that economists warned would risk causing a recession. He backpedaled after Treasury yields spiked, but for many investors the chaos exposed the risks of keeping so much money in dollars.

Diemer said the pull back from Treasuries will be a long-term trend, adding that he’s not currently aware of “active shuffling of portfolios.”

Reallocations and maturities “will by handled well and smoothly by the market,” Diemer said. “But there will be changes and a bias and tendency toward the euro.”

That could be good news for Germany, which recently pledged to raise hundreds of billions of euros in debt to fund infrastructure and rearmament. Diemer said investors “are keen on the plans” to raise the fiscal room for maneuver, citing both the specified size and 12-year time period for approvals for infrastructure.

Investors also view the spending as an opportunity to “improve the environment” as it will make it easier for companies to make investments of their own, he said.

Germany aims to increase demand for bunds by examining and potentially adapting its mix of debt, Diemer said. He cited a plan to offer a seven-year bond again in the second half and said 50-year notes are also an option, albeit with a smaller volume. Diemer said he isn’t planning a return to the market for inflation-linked bonds.

“When we Germans plan to do something, there’s a lot of trust internationally that we will do it,” Diemer said. “We often need a long time to decide, get out of the box and reflect and adapt things that are important to us. But that’s always happened in the past and international investors appreciate that.”

Written by: Nicholas Comfort — With assistance from Christoph Rauwald and James Hirai @Bloomberg

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