US treasury yields rise, stocks slip after Moody's US downgrade
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The news: Treasury yields rose and US stock futures fell alongside the US dollar due to concerns about US debt and rising deficits after Moody's downgraded its US sovereign credit rating from triple-A on Friday.
The numbers: The 30-year yield rose as much as eight basis points to 5.02% on Monday, the highest since November 2023. The benchmark 10-year rate rose seven basis points to 4.55%.
US equity futures for the S&P 500 and the Nasdaq fell 1.2% and 1.5% respectively.
The dollar fell against all of its Group-of-10 peers, with the euro surging over 1% to USD1.1284. ($1.75)
The context: Late on Friday, credit rating agency Moody’s announced it would downgrade the US from Aaa to Aa1, compounding concerns on Wall Street about the country’s fiscal outlook.
Moody’s said that successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits. The country has amassed USD36 trillion of debt. It added that over the next decade, it expects larger deficits as entitlement spending rises while government revenue remains broadly flat.
Nicolas Trindade, a fund manager at Axa’s asset management arm, told the FT that the Moody’s downgrade was a “stark reminder that the US should not take for granted its ‘exorbitant privilege’ that enabled it to issue debt at a relatively lower cost despite a very high fiscal deficit”.
