Every Tuesday afternoon we publish a collection of topics and give our expert opinion about the Equity Markets.

Volatility has been the name of the game during the month of April with global stock market indices, particularly in the US, gyrating wildly throughout the month so much so that the Nasdaq 100 entered into a technical bear market on April 8 but has since rebounded over 13% and is slightly positive for the month. The actions of the Trump administration have sent investors fleeing the US market, not just in equities but in treasury debt as well, which is noteworthy given the “safe haven” status of US treasuries. This begs the question of what safe-haven alternatives are available for investors, and could Australian AAA-rated debt be on the investment list for global investors? ABSI this week aims to find out. 

In times of geopolitical and economic uncertainty, investors traditionally seek refuge in sovereign debt issued by the United States, long considered the world’s premier "safe haven." However, cracks are beginning to show. The size of the debt burden, coupled with the Trump administration’s renewed focus on tariffs, deregulation, and fiscal expansion, has triggered concerns that US Treasuries may no longer offer the safety investors once took for granted.

Source:  Bloomberg

The alternatives to US Treasuries are limited. Gold is having a stellar run in 2025 and has been the primary shelter for investors but there is a need for diversification but unfortunately the pool of high-quality sovereign credit is a shrinking one. Globally, there are only a handful of major economies that carry the coveted AAA credit rating including Australia, Germany, Switzerland, Norway, Singapore, Denmark, and the Netherlands. 

Each of these economies offers a strong institutional framework, a stable political environment, and fiscal discipline. However, size and liquidity are crucial considerations. Germany, for example, has emerged as an increasingly attractive destination. Recent plans to substantially expand German debt issuance to fund infrastructure and defence have added much-needed liquidity to the Euro sovereign market, helping to drive euro appreciation.

Yet, not every AAA country can afford to follow Germany’s playbook. The core dilemma for sovereign debt investors boils down to two competing forces:

• Credit Quality: Investors want the security of a top-rated sovereign borrower. Too much issuance and rising debt levels threaten the credit rating.
• Liquidity: Investors also need deep, liquid markets to ensure they can enter and exit positions easily. Insufficient supply — even from a pristine borrower — limits appetite.

Germany’s recent shift toward more debt issuance shows that liquidity can drive investor demand even without compromising the perception of safety, at least temporarily. However, Australia may not have the same flexibility. While increased debt issuance might temporarily bolster Australia's appeal as an alternative to US Treasuries, it would simultaneously edge the country closer to a downgrade, nullifying the core attraction.

Source: CEIC

According to S&P Global Ratings, Australia’s AAA credit rating is at risk as ballooning government debt, driven by politically motivated spending promises ahead of the 2025 election, threatens to erode the country’s financial strength. The agency has warned that Australia’s net debt-to-GDP ratio could climb over the next few years, materially weakening the credit profile that underpins the AAA status.

For now, Australia remains on the list of potential non-US safe havens thanks to its rare AAA rating. But its position is far from secure. Investors looking for alternatives to US Treasuries must navigate a delicate balance: finding countries that can provide both high credit quality and adequate market liquidity. Australia’s inextricable links to China also hurt its arguments. 

Germany’s case shows that carefully managed increases in issuance can boost safe-haven appeal. However, for Australia, any misstep could come at a steep cost. Sovereign debt investors, hungry for security and scale, may find that the menu of true safe havens is narrower — and riskier — than ever before.

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