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Bond yields jump after Moody’s downgrade of U.S. credit. Why it matters for consumers — and Congress. - MarketWatch

1. Moody's downgraded U.S. credit ratings, affecting Treasury yield performance. 2. Foreign demand for Treasurys is decreasing amid rising concerns over the U.S. deficit. 3. Higher Treasury yields could lead to increased borrowing costs for U.S. consumers. 4. Tax bill proposals could add up to $6 trillion to the U.S. deficit. 5. Sustained high rates could challenge U.S. government's financial stability.

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FAQ

Why Bearish?

The downgrade and rising yields indicate reduced investor confidence in U.S. fiscal health, akin to previous credit downgrades that dampened DXY performance and raised borrowing costs, leading to a stronger dollar.

How important is it?

The downgrade directly impacts Treasury yields and investor sentiment towards the U.S., significantly affecting the DXY's valuation as higher yields generally draw foreign investors away from dollar-denominated assets.

Why Short Term?

Immediate reactions to downgrades and rising yields will likely impact Treasury demand and DXY, similar to past instances where government fiscal concerns quickly influenced currency valuations.

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