Moody's decision sparks sell-off in US assets

Following Moody's downgrade of the US government's credit rating, there was a significant market reaction. The yield on long-term American Treasury bonds briefly surged past the critical 5% threshold, while stock prices and the dollar declined.

On Friday, Moody's announced it was lowering the US government's rating from the highest AAA to AA1, citing concerns over the escalating budget deficit attributed to the American Presidents and congressional lawmakers. This downgrade has heightened Wall Street's worries over the country’s sovereign bond market.

On Monday, May 19, the yield on 10-year Treasuries increased by three basis points to 4.50%, while the yield on 30-year Treasuries briefly climbed by six basis points to 5.00% before correcting. Sustained hikes above 5% would return yields to levels not seen since 2023, when they peaked at 5.18%, the highest since 2007.

Typically, rising bond yields strengthen currencies. However, concerns over government debt may undermine confidence in the greenback. On Monday, the S&P 500 index fell by more than 1%, and the Nasdaq 100 index declined slightly as well.