U.S. Bond Yields — What’s Driving the Surge
U.S. Credit Downgrade and Massive Tax Cut Proposals Shake Markets — But Our Portfolio Stays Strong
The U.S. just lost its last perfect AAA credit rating — and markets felt the tremor.
Mounting fiscal fears pushed 30-year yields to above 5%.
Investors turned risk-averse as tariff threats and ballooning debt came under the spotlight.
The bond market on Wednesday with 30-year Treasury yields closing above 5% at 5.09% for the first time since October 2023. There are two main reasons behind the move:
The U.S. has officially lost its AAA credit rating across all major agencies
A massive new tax cut proposal could worsen the already fragile debt outlook
📊 Behind the Surge in U.S. Treasury Yields
1.1 Triple-A No More: Rating Downgrade
On May 16, 2025, Moody’s downgraded the U.S. long-term credit rating from Aaa to Aa1, citing growing concerns over the country’s rising debt, higher interest payments, and political gridlock.
This marks a historic moment — for the first time, all three major credit rating agencies (S&P, Fitch, and now Moody’s) have stripped the U.S. of its top-tier AAA rating:
S&P cut the rating in 2011 due to the debt ceiling crisis
Fitch followed in 2023, pointing to post-COVID fiscal slippage
Moody’s now joins them in 2025, completing the downgrade trifecta
1.2 Massive Tax Cut Bill Fuels Deficit Worries
Investors were already worried, but this downgrade added fuel to the fire—especially because it came just as Republicans in Congress pushed a sweeping tax cut plan that could add trillions to the already massive $36 trillion federal debt. While the plan aims to boost growth, many fear it will worsen the U.S.'s long-term fiscal path.
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