rating agency Moody's announced after the U.S. market closed last Friday (May 16) that it would lower the U.S. sovereign credit rating from the highest "Aaa" to "Aa1", citing the increasing fiscal deficit in the United States and the heavy federal debt burden. Following Fitch and S&P Global, the three major rating agencies have not ranked U.S. sovereign credit at the highest level.
Affected by Moody’s downgrade of the U.S. sovereign credit rating, the 30-year Treasury bond yield briefly rose above 5% in the early trading Monday (May 19), hitting a key psychological hurdle for market attention and reflecting investors’ concerns about the U.S. fiscal outlook.
On Monday (19th), the 10-year U.S. Treasury yield rose by 3 basis points to 4.5%, while the 30-year U.S. Treasury yield rose by about 6 basis points to 5%, and then the gains fell. If the long-term yield continues to exceed 5%, it may return to the level in 2023, which rose to 5.18% that year, the highest point since 2007.
The rating downgrade comes as the U.S. Congress continues to discuss a new round of tax cuts, and most of these plans lack clear funding sources. Meanwhile, President Trump broke his long-standing trade partnership and renegotiating the agreement also put the U.S. economy at downside risks.