The “sell America” trade (or narrative or whatever you want to call it) is bleeding equities’ joie de vivre. The combination of a weaker dollar and a heavy US long-end feels inauspicious, and risk sentiment doesn’t love it.

I realize a lot of market observers would rather not concede this is happening, because it raises uncomfortable questions. And any longtime reader can attest that I’m the last person to promote de-dollarization narratives for the sake of them.

But right now, the price action’s just the price action. You don’t have to fret about the end of American democracy nor cast any other sort of aspersions Donald Trump’s way. You do, however, need to acknowledge what’s in front of you:

Maybe that conjuncture’s not a disaster, let alone any kind of apocalypse harbinger. But it’s hard to spin it as constructive. I mean, what’s to like? The dollar’s back-footed in the presence of higher long-end US yields, and as discussed here on Tuesday, the term premium’s holding at the widest levels in years.

“Just as the ‘right-side’ US equities story was getting interesting again, macro dysfunction strikes back, as the tied-at-the-hip bleed in the USD and the UST long-end exposes further downside susceptibility in each,” Nomura’s Charlie McElligott sighed on Wednesday, noting that “a decade plus of US exceptionalism and QE largesse helped to facilitate over-ownership which is now leaking out.”

The figure on the left, below, is yet another visualization of that “over-ownership” point (for more, see here.) Charlie’s annotation says it all: There’s “plenty” of US Treasury exposure that may be subject to a reallocation dynamic (glacial as “anti”-USD dynamics tend to be) depending on how geopolitical events and trade talks develop.

The figure on the right is just an updated snapshot of downside dollar hedging. Simply put: Traders have virtually never been this bearish on the greenback.

“I think the current dynamic with the dollar and ‘exceptionalism unwind’ is not just about the shrinking growth premium and interest rate differentials to RoW, but now too about the abrupt ‘Plan B’ shift in Trump’s trade policy, where tariffs are increasingly ‘out’ and FX is ‘in,'” McElligott went on, referencing recent news flow around Taiwan and South Korea.

Traders now plainly believe The White House sees a currency accord, explicit or tacit, as preferable to enormous tariffs, and that’s showing up in demand for dollar puts. (That was the backdrop for this week’s G-7 meeting in Canada. The assumption was that Scott Bessent isn’t — and I’ll be polite here — brave enough to risk changing the wording around exchange rates in the communique. But it’s better safe than sorry, which probably explains some of the hedging.)

In the same Wednesday note, McElligott observed that the US yield curve “remains too flat” in the context of pervasive fiscal fretting. He quoted Nomura’s rates desk, which said that “in the past,” the US long-end found ready buyers when 30-year yields approached or exceeded 5%, but this time “it feels like we may need to test higher yields for investors to re-engage,” at least “from the Asian region.”