14 Years Too Late – U.S. Downgrade Pushes Long Borrowing Costs Over 5%, Senate Likely To Pass Stablecoin Bill

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U.S. Downgraded

Please click here for an enlarged chart of iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT).

Note the following:

• The chart shows Treasuries were almost out of the danger zone marked on the chart.
• The chart shows Treasuries have fallen below the danger zone on Moody’s downgrading U.S. debt.
• The chart shows Treasuries are now in zone 4 (support).
• The chart shows Treasuries have not been this low since Fall 2023.
• Here is a historical perspective of what happened when Standard & Poor’s downgraded U.S. debt in August 2011.
  • The next trading session S&P 500 fell 6.7%, and the Dow Jones Industrial Average fell 5.6%.
  • Over the following weeks, the market experienced heightened volatility with consecutive days with 4+% swings in either direction.
  • The stock market dropped more than 20%, technically entering a bear market for a short period.
  • By December 31, 2011, the market ended the year roughly flat.
• In our analysis, the impact of the downgrade is likely to be muted and very different from 2011 for the following reasons:  
  • Moody’s is simply 14 years too late.  Based on the data, Moody’s should have downgraded U.S. debt in 2011. 
  • There is no new information in Moody’s downgrade.
  • In 2011, the S&P 500 downgrade was a shock.  Now, there is nothing new here.
  • Stock market bulls are pinning their hopes on President Trump’s “big beautiful bill.”  The House Budget Committee advanced the reconciliation bill.  The bill includes both tax cuts and spending cuts and a debt ceiling increase.  The House will likely vote later this week.  
  • The momo crowd is now more powerful than ever.  The momo crowd does not do any analysis and does not take risk …

Full story available on Benzinga.com