Yields climbing but mostly unbothered by Moody's outlook change

<p>Friday after the close, <a href="https://www.forexlive.com/news/moodys-changes-outlook-on-usa-soverign-ranking-to-negative-affirms-aaa-rating-20231110/" target="_blank" rel="follow">Moody's lowered</a> its outlook out the USA's sovereign rating from stable to negative. The move isn't a big surprise given that the US has already been downgraded by S&amp;P and Fitch (the latter was in August). Lowering the outlook doesn't mean a downgrade is coming but it's a step in that direction.</p><p>In response, US 10-year yields are up 3.8 bps to 4.67%. They've creeped up in the past few minutes to boost the dollar but are hardly running away.</p><p>The modest reaction suggests that the Fitch downgrade in August wasn't a big reason behind the rout in bonds afterwards. The market has a good handle on US debt and knows it's a problem; no one needs a ratings agency to spell it out. The bigger events are debt auction sizes climbing and less appetite from buyers. Last week's poor 30-year bond auction is continuing to reverberate with some pointing to the ransomware attack at ICBC making it problematic. We will have to wait near a month to test that theory on the long end.</p><p>There are no coupon auctions this week but next week, we get 2s, 10s and 20s.</p><p>Technically, there is some reason for worry on the 10-year chart. We've been consolidating in the 4.50-4.67% range since the big drop at the start of the month. If the high end breaks, we could retest 4.75-4.80% and rekindle some of the worries about yields. If so, that might undermine some of the recent optimism in equities and help to boost USD/JPY to a new 32-year high.</p>

This article was written by Adam Button at www.forexlive.com.