Longer-dated US Treasury yields surged to the 5% level and S&P 500 futures slid after Moody’s Ratings downgraded the United States’ credit score late Friday, intensifying market fears over rising debt and fiscal instability.
The agency cut the US rating to Aa1 from Aaa, citing years of ballooning deficits under successive presidents and gridlocked lawmakers. The move trails earlier downgrades by Fitch and S&P, and renews worries over the long-term outlook for US sovereign bonds.
On Monday, 10-year yields rose to 4.52%, while 30-year yields climbed to 5.00%, revisiting levels last seen in 2023, when rates peaked at 5.18%—the highest since 2007.
“This downgrade is unsurprising,” said Max Gokhman of Franklin Templeton. “Debt servicing costs are rising, and large investors may shift out of Treasuries, triggering a dangerous bear steepener—higher long-term yields, a weaker dollar, and less demand for US equities.”
Wells Fargo strategists expect yields to rise another 5–10 basis points in the coming days. Meanwhile, a Bloomberg dollar index is hovering near April lows, as sentiment among options traders hits its most bearish level in five years.
Earlier shocks to markets from Trump’s tariff threats in April had already sparked concerns. Though tariffs were later paused, attention shifted back to America’s fiscal path, now exacerbated by this downgrade.
S&P 500 futures dropped over 1% Monday morning in London, while Nasdaq 100 contracts declined even more. On Friday, a key ETF tracking the S&P 500 also fell 1% after hours following Moody’s announcement.
“The erosion of Treasuries’ safe haven status,” wrote SocGen’s Subadra Rajappa, “will hurt the dollar and reduce foreign demand for US assets over time.”