30-Year Treasury Bill Yields Exceed 5% Following Moody’s Downgrade of U.S. Rating from Aaa to Aa1

The yield of U.S. 30-year Treasury bonds has surged past the 5% mark for the first time since April, hitting an intraday peak of 5.011%. This increase follows Moody’s recent downgrade of the U.S. credit rating, which has been impacted by growing deficits and rising interest expenses.

The previous instance when the long end of the yield curve reached 5% was on April 9, a period referred to as the “tariff tantrum,” which resulted in significant sell-offs in both cryptocurrency and U.S. equity markets.

At that point, the price of bitcoin (BTC) was near its local low of around $75,000. It has since made a notable recovery, trading at approximately $103,000 after reaching a high of $106,000 on Sunday.

“The last occurrence of a 30-year closing yield at or exceeding 5% was on October 31, 2023. The most recent peak closing yield was 5.11% on October 19, 2023, marking the highest rate since July 2007. The current yield is only 12 basis points shy of surpassing that benchmark,” stated Jim Bianco, head of Bianco Research.

Additionally, the United Kingdom eclipsed China in March to become the second-largest overseas holder of U.S. Treasury bonds, with $779.3 billion in holdings, following Japan, which retains its position as the top foreign holder.

China and Japan have both been reducing their U.S. Treasury holdings over the last year, highlighting a growing necessity for the U.S. to attract additional buyers for its debt instruments.

As the U.S. Treasury grapples with increasing deficits, the issuance of more bonds is anticipated, which would elevate supply and subsequently drive yields higher while pushing prices down. Concurrently, Nasdaq futures are down approximately 2%, indicating a general risk-off approach in the market.