Moody's downgraded the US sovereign debt credit rating last Friday due to concerns about the nations growing “debt pile”.
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As expected, US Treasury yields jumped while global stock indexes fell to start the week. Mostly.
Join 200K+ Subscribers: Find out why the midday Barchart Brief newsletter is a must-read for thousands daily. Meanwhile, the US dollar index was under pressure, a somewhat unexpected move but possibly indicating more about the US standing in the global game as a whole.
Last Friday afternoon, after markets had shut down for the day, the financial services company Moody’s “downgraded the U.S. sovereign credit rating due to concerns about the nation’s growing $36 trillion debt pile”[i]. According to a Reuters piece, Moody’s first gave the US its “pristine” Aaa” rating back in 1919 and was the last of the three major credit agencies to downgrade the US rating. For the record, Moody’s took the US down to Aa1 due to “wider fiscal deficits and higher interest payments”. The company stated, “Successive US administrations and Congress have failed on measures to reverse the trend of large annual fiscal deficits and growing interests costs”. In the grand scheme of things, what does all this mean? To begin with, theoretically it could “complicate” the US president’s[ii] mantra of cutting taxes. This also gives the US Federal Open Market Committee new ammunition to actually raise interest rates, theoretically strengthening the US dollar. The initial market response was for yields on US Treasury bonds to jump higher, casting a weekend-long shadow over the open to global equity markets this week. With that in mind, let's take a look at the financial sectors early Monday morning.
