FX.co ★ US 10-Year Yield Holds Above 4.5%

The yield on the 10-year US Treasury note settled at 4.5% after hitting a three-month peak of 4.55% earlier in Monday’s session. Meanwhile, the yield on the 30-year bond remained near its October 2023 high of 5%. Moody’s downgraded the US credit rating from Aaa to Aa1 due to rising government debt and an expanding budget deficit. This downgrade signifies the loss of a triple-A rating from all major rating agencies, underscoring Fed Chair Powell’s concerns about the unsustainable deficit trajectory. Further compounding fiscal issues, a congressional committee approved President Trump's proposed tax legislation, which includes significant unfunded tax cuts, despite his commitment to reduce the US deficit. On the monetary policy front, markets are anticipating two interest rate cuts from the Federal Reserve, with reductions expected in September and December.