US 30-Year Treasury Yield Hits 5.02% Amid Credit Downgrade

US Treasury Yield Surges After Moody’s Credit Downgrade

The yield on the 30-year US Treasury surged to 5.02% on May 19, 2025, marking the highest level since November 2023, as Moody’s downgraded US credit.

Market Response to Downgrade

The 30-year US Treasury yield reached 5.02% , following Moody’s downgrade of US credit from Aaa to Aa1. Market actors are responding with the “sell America” trade, highlighting concerns over the US’s fiscal health.

Moody’s Ratings Agency downgraded the US rating, emphasizing the government’s failure to address fiscal deficits. Nicolas Trindade, Fund Manager at Axa’s asset management arm, described the Moody’s downgrade as a “stark reminder that the US should not take for granted its ‘exorbitant privilege’ that enabled it to issue debt at a relatively lower cost despite a very high fiscal deficit.”

The US dollar weakened, S&P 500 and Nasdaq futures fell, and other currencies rose against the dollar. The yield increases across asset classes, indicating widespread market unease.

Experts warn of economic issues if fiscal deficits continue. Bond market professionals mention potential protests from “bond vigilantes” if deficits balloon. Warnings echo the need for regulatory adjustments.

Historical patterns show that past downgrades such as in 2011 led to volatility; however, rates then fell as Treasuries were seen as safe. Current trends might differ, affecting future fiscal decisions.

Potential outcomes include heavier debt loads influencing economic policy and investor interest. Future fiscal policies may require severe measures to manage debt sustainably. Financial institutions watch closely for further shifts.