U.S. Treasury yields wavered Tuesday as traders assessed the Federal Reserve's potential policy moves in the near future after benchmark rates reached key levels in the prior session.
The yield was last 3 basis points higher at 4.969% after briefly surging past 5% on Monday. The advanced 1 basis point to 4.485%. The 10-year yield topped 4.5% on Monday before easing.
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WATCH HEREOne basis point is equivalent to 0.01%, and yields and prices move in opposite directions.
Yields swung higher on Monday after Moody's Ratings lowered the U.S. credit rating to the second-highest tier, following in the footsteps of S&P Global Ratings and Fitch, which did so in 2011 and 2023, respectively.
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SIGN UP The downgrade from Aaa to Aa1 by Moody's is "admittedly significantly dire," said Vishnu Varathan, head of macro research at Mizuho Securities. But the move is "inconsequential" for markets, he wrote in a note.
Though the resultant jolt in yields may clip already tentative market optimism, the downgrade is unlikely to crush the broader recovery, he added. The downgrade has no adverse impact on the liquidity and collateral value of U.S. Treasurys, and hence no "imminent shock" from forced liquidation, Varathan said.
"Above all, there are no triple-A alternatives for markets that are sufficiently deep and liquid to threaten the reserve asset status of USTs that is tagged to the U.S. Dollar's global reserve currency status," he added.
Money Report
In April, U.S. Treasury yields surged after U.S. President Donald Trump introduced broad "reciprocal tariffs" targeting foreign trade partners. Concerns over a potential financial panic and higher consumer borrowing costs led the administration to scale back the most aggressive tariffs.
