Treasury Yields Unmoved by Moody’s U.S. Downgrade

Moody’s on Friday lowered its rating outlook on the United States government to negative from stable, pointing to rising risks to the nation’s fiscal strength.

The rating agency noted that the country is not demonstrating effective fiscal policy measures to reduce government spending or increase revenues in the context of higher interest rates. It anticipates that U.S. fiscal deficits will remain high, greatly weakening debt affordability.

U.S. Treasury yields were little changed at the start of the new week, as investors held off from making moves before key inflation information was released this week.

In early trading, the yield on the 10-year Treasury was up less than 1 basis point, at 4.63%. The 2-year Treasury yield last traded at 5.056% after slipping less than one basis point. Yields and prices move in opposite directions. One basis point equals 0.01%.

Moody’s is concerned about continued threats of a U.S. government shutdown. The government is funded until November 17, but lawmakers continue to squabble about financing agreements after that.

Important new economic data is expected soon, with the October consumer price index and the October producer price index set to be released midweek.

Fed Chairman Jerome Powell last week said that inflation is still too high and reiterated the central bank’s commitment to bring it back down to the 2% target range, adding that the current monetary policy stance may not be restrictive enough to achieve the goal.