Impact of US Credit Downgrade... 30-Year Treasury Yield Exceeds 5% Annually

Korea Economic Daily

Summary

Moody's downgraded the US sovereign credit rating, causing instability in Treasury yields.
Notably, the 30-year US Treasury yield exceeded 5%, raising the possibility of further increases in long-term Treasury yields.
Investors are betting on rising long-term Treasury yields, with concerns that the traditional role of US Treasuries may diminish.

"Investors Betting on Rising Treasury Yields"

The international credit rating agency Moody's has downgraded the United States' sovereign credit rating from the highest rating of 'Aaa' to 'Aa1', causing instability in US Treasury yields. Notably, the 30-year Treasury yield has surpassed the 'psychological resistance level' of 5% annually.

On the 20th (local time), the 30-year US Treasury yield broke through 5% during the day in the US Treasury market. The previous day, it rose to 5.03%, exceeding 5% for the first time since November 2023. The 10-year Treasury yield jumped to 4.52% during the day. Since Moody's downgraded the credit rating on the 16th, it has risen by about 0.1 percentage points.

Experts are weighing in on the possibility of further increases in US Treasury yields. As the US credit rating has been lowered, investors are likely to demand higher returns on US Treasuries. Wells Fargo analyzed that the 10-year and 30-year US Treasury yields could rise by an additional 0.05 to 0.1 percentage points. Bloomberg News reported, "Investors are betting on rising long-term Treasury yields," and "In the Treasury options market, there is talk of the 10-year US Treasury yield reaching 5% annually." Henry McVey, Chief Investment Officer (CIO) at KKR, pointed out, "The traditional role that US Treasuries have played in many global portfolios will gradually diminish," adding, "The reality is that the US government is burdened with a massive fiscal deficit and high debt."

Reporter Han Kyung-jae hankyung@hankyung.com