There is no rest for US Treasuries. The minute the trade tensions between the US and China were settled, at least for the period of 90 days, a new storm hit the market throughout rising concerns over the sustainability of the US debt. At least as this sustainability is perceived by the rating agency Moody’s, which downgraded the US sovereign rating by one notch late Friday. This news had an negative impact on the investors sentiment, but the most volatility in the US Treasury yields occurred in an after-hours trading on Friday, when the news hit the market.
Regardless of the news about US sovereign downgrade, the higher volatility was evident also during the previous week. The highest surprise came from the University of Michigan inflation expectations, which reached 7,3% for this year and 4,6% in a period of five years. This was higher from the previous estimate and certainly was a reflection of the imposed trade tariffs between the US and China. The highest weekly level of the 10Y US benchmark was 4,54%, however, yields are ending the week at the level of 4,44% in an after-hours trading on Friday. For the week ahead, there is no significant macro data scheduled for a release, however, the volatility might continue, especially on Monday. The reaction on a downgrade news might impose some increase in yields, until the market finds the new equilibrium level. On the opposite side some modest relaxation is also probable, around 4,0%-3,8% level.
Regardless of the news about US sovereign downgrade, the higher volatility was evident also during the previous week. The highest surprise came from the University of Michigan inflation expectations, which reached 7,3% for this year and 4,6% in a period of five years. This was higher from the previous estimate and certainly was a reflection of the imposed trade tariffs between the US and China. The highest weekly level of the 10Y US benchmark was 4,54%, however, yields are ending the week at the level of 4,44% in an after-hours trading on Friday. For the week ahead, there is no significant macro data scheduled for a release, however, the volatility might continue, especially on Monday. The reaction on a downgrade news might impose some increase in yields, until the market finds the new equilibrium level. On the opposite side some modest relaxation is also probable, around 4,0%-3,8% level.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.