US Credit Downgrade Treasuries rose, and the dollar strengthened on Wednesday, hurting global markets. Investors faced the surprise reduction of the United States’ top-tier national credit rating, and private payroll statistics showed a solid U.S. employment market.
After Fitch lowered the U.S. credit rating from AAA to AA+ due to worsening finances, the stock market fell, but investors remained unfazed.
New York Alliance Bernstein head economist Eric Winograd argues the U.S. cannot default. Long-term and short-term Treasuries will remain popular. He doesn’t believe the downgrading portends disaster.
The Dow sank 1% to 35,282, the S&P 500 fell 1.38% to 4,513, and the Nasdaq Composite fell 2.17% to 13,973.
The decline affected global stock markets. Europe’s STOXX 600 lost 1.35 percent. Asia-Pacific stocks fell 2% earlier. China’s shaky economy contributed to this.
After favorable news regarding private employment and a government promise to repay debt, long-term U.S. Treasury prices rose. A 10-year U.S. bond yielded 4.074%.
The U.S. Treasury seeks $1.007 trillion in third-quarter borrowing. This is the most money borrowed this time. In the third and subsequent quarters, it will boost all bids by tiny amounts.
On Wednesday, the dollar strengthened after Fitch downgraded it. Private payrolls boosted the dollar and demonstrated a healthy employment market. USD rose 0.6%.
U.S. Treasury credit default swaps were unaffected. The CBOE Market Volatility Index rose 15% on Wednesday but remained around its year-low.
Hargreaves Lansdown’s lead stock analyst, Sophie Lund-Yates, said the dollar index and U.S. Treasury Bonds’ lack of change suggested that the market has already evaluated the harm from recent events.
Fitch’s downgrade angered the White House. Officials stated it was random and based on obsolete data. Two months after the U.S. bankruptcy arrangement, the relocation occurred.
The downgrade has spooked financial markets and raised awareness of U.S. debt, but investors don’t expect it to affect Treasuries.
I.G. specialist Tony Sycamore stated that the Fitch rating, dismal U.S. and Chinese numbers, and weaker-than-expected outcomes had forced some investors to withdraw their money from the market.
After a surprise policy move last Friday, Japan’s 10-year bond yield touched a nine-year high on Wednesday. We left the yen’s value versus the dollar unchanged for three days of falls.
Despite Thursday’s unclear Bank of England rate hike, monetary policy remained the focus. Investors projected a 25% jump after June’s 50 basis-point hike.
Economic data, particularly concerning the U.S. labor situation, was critical this week.
After Fitch downgraded the U.S., oil prices fell on Wednesday. U.S. crude declined 1.9% to $79.82 a barrel, while Brent fell 1.64% to $83.52.
The stronger dollar and higher bond rates lowered gold prices on Wednesday. Investors were considering Fitch and anticipating U.S. non-farm payroll data later in the week. Gold declined 0.5% to $1,934.Treasuries rose, and the dollar strengthened on Wednesday, hurting global markets. Investors faced the surprise reduction of the United States’ top-tier national credit rating, and private payroll statistics showed a solid U.S. employment market.
After Fitch lowered the U.S. credit rating from AAA to AA+ due to worsening finances, the stock market fell, but investors remained unfazed.
New York AllianceBernstein head economist Eric Winograd argues the U.S. cannot default. Long-term and short-term Treasuries will remain popular. He doesn’t believe the downgrading portends disaster.
The Dow sank 1% to 35,282, the S&P 500 fell 1.38% to 4,513, and the Nasdaq Composite fell 2.17% to 13,973.
The decline affected global stock markets. Europe’s STOXX 600 lost 1.35 percent. Asia-Pacific stocks fell 2% earlier. China’s shaky economy contributed to this.
After favorable news regarding private employment and a government promise to repay debt, long-term U.S. Treasury prices rose. A 10-year U.S. bond yielded 4.074%.
The U.S. Treasury seeks $1.007 trillion in third-quarter borrowing. This is the most money borrowed this time. In the third and subsequent quarters, it will boost all bids by tiny amounts.
On Wednesday, the dollar strengthened after Fitch downgraded it. Private payrolls boosted the dollar and demonstrated a healthy employment market. USD rose 0.6%.
U.S. Treasury credit default swaps were unaffected. The CBOE Market Volatility Index rose 15% on Wednesday but remained around its year-low.
Hargreaves Lansdown’s lead stock analyst, Sophie Lund-Yates, said the dollar index and U.S. Treasury Bonds’ lack of change suggested that the market has already evaluated the harm from recent events.
Fitch’s downgrade angered the White House. Officials stated it was random and based on obsolete data. Two months after the U.S. bankruptcy arrangement, the relocation occurred.
The downgrade has spooked financial markets and raised awareness of U.S. debt, but investors don’t expect it to affect Treasuries.
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I.G. specialist Tony Sycamore stated that the Fitch rating, dismal U.S. and Chinese numbers, and weaker-than-expected outcomes had forced some investors to withdraw their money from the market.
After a surprise policy move last Friday, Japan’s 10-year bond yield touched a nine-year high on Wednesday. After three days of falls, we left the yen’s value versus the dollar unchanged.
Despite Thursday’s unclear Bank of England rate hike, monetary policy remained the focus. Investors projected a 25% jump after June’s 50 basis-point hike.
Economic data, particularly concerning the U.S. labor situation, was critical this week.
After Fitch downgraded the U.S., oil prices fell on Wednesday. U.S. crude declined 1.9% to $79.82 a barrel, while Brent fell 1.64% to $83.52.
The stronger dollar and higher bond rates lowered gold prices on Wednesday. Investors were considering Fitch and anticipating U.S. non-farm payroll data later in the week. Gold declined 0.5% to $1,934.
Our Reader’s Queries
Did the US get a credit downgrade?
The government’s long-term credit rating took a hit in August when Fitch Rating downgraded it from AAA to AA+.
How many times has US credit been downgraded?
The US government’s debt has been downgraded for the second time. The first downgrade occurred in 2011, when the credit rating agency Standard & Poor’s reduced the US credit rating from AAA to AA+. This was due to a heated debate in Congress over the debt’s size.
Why was US credit downgraded in 2011?
In 2011, S&P downgraded the long-term credit rating from AAA to AA+ due to political polarization following a debt ceiling dispute in Washington. This move represented a shift away from the “risk-free” rating previously assigned to the credit.
What happens if US debt is downgraded?
When a debt issuer’s credit rating is downgraded, they may have to pay a higher interest rate to account for the increased risk of default. This is a common occurrence and is meant to protect lenders from potential losses.