NEW YORK — Longer-dated Treasury yields rose on Monday on concerns that a U.S. tax bill will increase the debt load by more than previously expected after Moody’s Investors Service on Friday also cut the United States’ sovereign credit rating from the top “Aaa.”
The yields backed away from earlier highs, however, after they reached levels that are seen as attractive to some buyers and with no major economic releases this week expected to drive market direction.
U.S. President Donald Trump’s sweeping tax-cut bill won approval from a key congressional committee on Sunday and Republicans who control the U.S. House of Representatives will try to nudge the bill toward passage this week.
“That looks like it’s going to add more to the deficit than perhaps initially forecasted when looking at a Republican-controlled House and Senate,” said Michael Lorizio, head of U.S. rates trading at Manulife Investment Management. “That’s probably as much, if not a greater driver than the downgrade.”
Nonpartisan analysts say the bill could potentially add $3 trillion to $5 trillion to the nation’s ballooning $36.2 trillion debt pile over the next decade.
Moody’s cited concerns about the nation’s growing debt as a reason for the downgrade and said the fiscal proposals under consideration were unlikely to lead to a sustained, multi-year reduction in deficits.
