U.S. Treasury yields were off their highs Monday afternoon but remained elevated after Moody’s downgraded the U.S.’s credit rating. Rates hit key levels that have pressured financial markets recently.
The 30-year Treasury yield hit a high around 5.03%, reaching levels not seen since November 2023. The yield last traded at 4.921%, up 2 basis points. The 10-year yield also climbed 2 basis points to reach 4.459%. Meanwhile, the 2-year Treasury yield shed 1 basis point to 3.972%.
One basis point is equivalent to 0.01%, and yields and prices move in opposite directions.
Investors proceeded to shake off the downgrade with bond buying seen as the session unfolded, driving yields lower from their highs.
Investor concerns had initially mounted after the rating agency Moody’s slashed the U.S.’ credit rating on Friday, bringing it down one notch from Aaa — the highest score — to Aa1. The agency attributed the downgrade to the increasing burden of financing the government’s budget deficit, as well as the high cost of rolling over existing debt amid high interest rates.
“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the rating agency said in a statement.
Moody’s has assigned a “country ceiling rating” of Aaa to the U.S. since 1949. It is now in line with all the major credit rating agencies that had already given the U.S. their second-highest available rating.
“This is a major symbolic move as Moody’s were the last of the major rating agencies to have the U.S. at the top rating,” Deutsche Bank analysts said in a note.
30-year Treasury yield, YTD
In April, Treasury yields jumped after U.S. President Donald Trump implemented sweeping “reciprocal tariffs” on international trade partners. The 10-year yield moved above 4.5% and the 30-year rate hit 5%, causing the Trump administration to back off the stiffest tariffs on fears they was causing a financial panic and would raise rates for consumers.
But now following the downgrade by Moody’s, the long-term Treasury yields have returned to these levels. Interest charged on consumer debt, such as mortgages, is tied to the 10-year note.
10-year Treasury yield, YTD
House Republicans were pushing ahead with Trump’s tax and spending bill this week, with the legislation making it past the House Budget Committee on Sunday evening. The bill, however, is estimated to add trillions to the budget deficit.
Moody’s warned about the lack of the country’s fiscal restraint in its downgrade: “Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”
“With tax cuts and tariffs hanging in the balance, Moody’s appears to be sending a message that it thinks these policy changes will, on net, put the US on an even worse fiscal trajectory,” wrote Bank of America economist Aditya Bhave in a note. “That is, tariff revenues won’t fully offset the cost of the proposed tax bill. We agree.”
Concerns about tariffs and the U.S. debt burden are raising questions about whether Treasurys are still a safe-haven asset for global investors.
