Rising U.S. Deficit Drives BlackRock Toward European Bonds

BlackRock, the world’s biggest asset manager, now prefers European government bonds over U.S. Treasuries. This shift comes as the U.S. government’s debt keeps rising fast.

Official data shows the U.S. deficit hit $1.1 trillion just five months into 2025, and the national debt keeps climbing. The Congressional Budget Office reports the deficit is up 13 percent from last year, mostly due to higher spending and rising interest costs.

U.S. 10-year Treasury bonds offer a 4.35 percent yield, which is higher than Germany’s 2.57 percent or Italy’s 3.71 percent. But BlackRock sees these higher U.S. yields as a warning sign, not a reward.

Investors now want more compensation to hold U.S. debt because the government keeps borrowing more, and inflation remains stubborn. The Federal Reserve has not cut interest rates, making U.S. bonds less attractive.

In contrast, the European Central Bank has lowered rates to 2.00 percent and expects inflation to stay around 2 percent this year. Europe’s more stable policies and lower debt levels make its government bonds safer in BlackRock’s view.

Italian and Spanish bonds, with yields above 3 percent, offer a balance of income and stability. This matters for everyone, not just investors. When a country borrows too much, it can push up interest rates for everyone and weaken its currency.

BlackRock’s move signals that even the biggest players see growing risks in U.S. debt and are looking for safer places to put their money. All data and figures come from official government and central bank sources, as well as BlackRock’s public investment outlooks.

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