The U.S.'s final triple credit ratings and growing concerns about government debt threaten to undermine the relative calm of financial markets since President Trump began halting tariffs early last month.
One stunning factor in the market is a bill in Congress that would make Mr. Trump’s 2017 signature tax cut permanent and could add trillions of dollars in federal debt. House committees voted to approve the bill Sunday night, although it is expected to remain the focus of Congressional debate.
Rating company Moody's cited the legislation Friday, while also growing concerns over rising fiscal deficits and debt costs, when it lowered its credit rating in the U.S. Moody's move means that all three major rating agencies no longer consider the U.S. eligibility for its highest credit rating.
U.S. stock futures show that when trading in the U.S. began Monday morning, the market will fall by about 1%.
During Asian trading, South Korea's Kospi and Taiwan's Taiex index fell by more than 1%. Stocks in Tokyo and Hong Kong fell about 0.5%. The U.S. dollar continues to violate other currencies, including the euro and the Japanese yen.
If the U.S. credit rating downgrade could send a further ripple effect through financial markets, then if it starts to shake the security of bond bonds. This could prompt global investors to demand higher premiums in return for buying U.S. debt.
Asian-traded 10-year bond yields rose to 4.51% after closing 4.44% on Friday.
Some analysts attribute the rise in yields to a credit downgrade that has exacerbated existing concerns about Mr. Trump’s tariff agenda and its impact on the U.S. economy and its assets.
U.S. stocks made huge gains last week when investors reacted positively to tariff reductions by U.S.-China deals.
Analysts say the downgrade of U.S. credit ratings can also train concerns about fiscal spending and interest rates paid by government debt in other countries. Among them is in Japan, which is one of the highest debt-to-GDP ratios in the world.
The move caused huge volatility in global financial markets when Standard & Poor's downgraded U.S. Treasury bonds in 2011. In the United States, all three major stock indexes have fallen, and have also delayed markets in Asia and Europe.
