Treasury yields (^TYX, ^TNX, ^FVX) remain elevated as the 30-year yield shot up to 5% after Moody's downgraded its credit rating on the US last Friday.
Yahoo Finance senior reporter Jennifer Schonberger relays how the Trump administration is trying to alleviate concerns around investing in the US, while Federal Reserve officials wait and see what this signifies for the economy and consumer prices in the long term.
Catch Jason Furman, the former Council of Economic Advisers (CEA) chairman under President Obama from 2013 to 2017, explain to Yahoo Finance why "there's something very different" about Moody's credit downgrade.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
Well, the 30-year Treasury yield jumped to a 2023 high on Monday as bond sold off in the wake of Moody's downgrade of US credit. Here to discuss how officials are reacting, Fed correspondent Jennifer Schonberger. Hi, Jennifer.
Good morning, Maddie. That's right. Treasury yields spiking as their prices fall after Moody's stripped the US of its last AAA credit rating, citing large deficits and rising interest rates. Take a look at the yield on the 10-year Treasury this morning, trading around 4 and a half percent in change. I think it was as high as 4.56 at one point, the highest level since April 11th. Now, remember that the yield on the 10-year Treasury impacts borrowing costs for consumers, namely mortgage rates. So if these higher yields hold, then consumers could see higher mortgage rates. Meanwhile, the yield on the 30-year Treasury topping 5%, a level not seen, as you said, since the fall of 2023. White House press secretary Caroline Levet held a briefing last hour, in which she said the president disagrees with Moody's assessment. She said that the world has confidence investing in the US, citing the trillions of dollars in investments that the president secured last week in the Middle East and the trillions secured earlier in his administration in terms of foreign direct investment. She also noted that inflation, as measured by the producer price index, dropped last month. Now, yesterday, Sunday, Treasury Secretary Scott Beson called Moody's downgrade a lagging indicator, saying that the US hasn't accumulated this level of debt in just the last 100 days. Elsewhere, this morning, we are hearing from some members of the Federal Reserve, who are weighing in on this Moody's downgrade. Atlanta Fed president Raphael Bostick, saying of the Moody's downgrade that we have to see how this plays out. He says he doesn't try to target ratings for the US government, but that these things will have implications for prices down the road, and it's something that the Fed will have to pay attention to. Meanwhile, Fed Vice Chair Philip Jefferson, who was actually in conversation with Bostick at a conference that the Atlanta Fed is holding down in Florida this morning, saying that essentially, the Fed is still focused on its goals of maintaining maximum employment and stable prices, and so that the Fed would have to look at the implications of this downgrade as it relates to those goals, Maddie.
And Jennifer, Treasury Secretary Scott Beson also talked about a bit of a warning for US trade partners over the weekend, noting that we could see a return to liberation day levels potentially. What else can you tell us?
Yeah, essentially Beson said that if trading partners are not negotiating in quote, good faith, then they could see their tariff levels ratcheted back up to April second levels. Certainly raising some question marks, given how much confidence we were hearing from Beson and the president about pending deals with the US's largest trading partners, the so-called largest 15 to 18 trading partners. So this certainly raises question marks about whether how those negotiations are going right now, or if this may pertain to smaller trading partners.
Really great overview, Jennifer. Thank you so much for making the time for us this morning.
