SINGAPORE— Longer-dated US Treasury yields rose on Monday, after Moody’s became the latest among major credit ratings agencies to cut its ratings on the country’s debt, further eroding confidence in dollar markets.
Moody’s Investors Service downgraded the credit rating for the world’s largest economy by a notch to “Aa1” from “Aaa” on Friday, citing large fiscal deficits and growing interest costs. The agency’s move was not much of a surprise to investors, given peers Fitch and S&P Global had downgraded the United States much earlier.
Markets also took stock of US President Donald Trump’s sweeping tax-cut bill that won approval from a key congressional committee on Sunday to advance toward possible passage in the House of Representatives later this week.
Nonpartisan analysts say the bill would potentially add $3 trillion to $5 trillion to the nation’s ballooning $36.2 trillion debt pile over the next decade.
The yield on 30-year Treasury notes jumped nearly 10 basis points and was last at 5 percent, close to its highs for the year.
“Confidence has been shaken (in US markets) and it is going to take some time for that to return and that’s going to leave participants jumping at shadows a little bit,” said Tony Sycamore, market analyst at IG.
“The reaction has been getting back to concerning levels for the 30-year yield and certainly that long end is showing some signs of distress,” Sycamore said.
Investor confidence in US financial assets has been steadily eroding this year as Trump’s erratic and aggressive trade policies stoke recession fears and shake longstanding faith in the dollar.
Those concerns have also weighed on US stocks and bonds, and driven 10-year yields up 50 basis points in around six weeks.
Yields on 10-year Treasuries were up about 8 basis points and last at 4.5 percent, while shorter-dated 2-year notes were broadly muted.
