The yield on US 30-year Treasurys surpassed 5% post-Moody's downgrade of the US credit rating from Aaa to Aa1. This downgrade happened just after President Trump's tax cuts were approved. The increase highlighted ongoing concerns about US fiscal deficits and rising debt, leading to volatility in the stock market. Experts noted a lack of agreement among US administrations on fiscal responsibility, raising fears about the US's ability to manage its debt in the long term, with Moody's projecting significant increases in federal debt as a percentage of GDP.
"If we stay at these levels this would be a higher yield than that seen at the worst close after Liberation Day," Jim Reid, managing director and head of global macro and thematic research at Deutsche Bank, said in a note on Monday.
Moody's stated, "Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs."
George Saravelos, Deutsche Bank's head of FX research, said, "The combination of diminished appetite to buy US assets and the rigidity of a US fiscal process that locks in very high deficits is what is making the market very nervous."
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