A week of continued volatility in financial markets and rising political stress in Congress came to a turbulent end when the ratings firm Moody’s downgraded the credit rating of U.S. debt from the highest level at AAA to one notch below, at Aa1.
Yields could very well rise in the near term with the 30-year Treasury note testing 5% and the 10-year approaching 4.5%.
In announcing the downgrade, Moody’s cited concerns over the federal budget deficit, which it expects to increase to nearly 9% from 6.4% last year. Moody’s joined two other agencies that in past years have lowered the U.S. credit rating.
The move followed a week of continued stress in financial markets as the yield on 10-year Treasury bonds traded as high as 4.55% despite market expectations of a more accommodative monetary policy.
Investors were responding to rising perceptions of risk in the American economy, including the prospect of tariff-induced inflation and…
