U.S. Budget Is Bigger Issue Than Ratings Downgrade; Treasury Yields Rise Further
1208 GMT – Moody's Ratings' downgrade of the U.S. to Aa1 may create near-term volatility, but the U.S. budget is an even bigger concern, says RBC BlueBay Asset Management's Russel Matthews. 'We are at a critical point with the progression of the 10-year plan for the U.S. budget through Congress,' the senior portfolio manager says in a note. How this develops over coming weeks will be critical for markets, he says. RBC BlueBay says there seems to be limited desire or ability for U.S. politicians to present a roadmap for a serious reduction in the fiscal deficit. U.S. Treasury yields extend their rise after the Moody's downgrade, lifting the 30-year yield to an 18-month high of 5.032%, according to Tradeweb. (emese.bartha@wsj.com)
0821 GMT – Treasury yields rise after Moody's Ratings cut the U.S.'s credit rating to Aa1 from Aaa due to rising debt, but significant selling is unlikely, says UBS in a note. Yields could rise by 10-15 basis points in the short term, as they did after the 2023 Fitch downgrade, but the downgrade is unlikely to 'trigger significant selling or changes in collateral haircuts,' it says. Most investment mandates don't require AAA ratings for U.S. Treasurys, and central banks value the Treasury market for its exceptionally deep liquidity, UBS says. Moody's joins S&P Global Ratings and Fitch Ratings, which both stripped the U.S. of its triple-A rating in previous years. The 10-year Treasury yield rises 8 basis points to 4.517%, Tradeweb data show. (emese.bartha@wsj.com)
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