Bloomberg Daybreak: Asia Edition Markets React to Moody's US Credit Downgrade
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May 19, 2025 Tobias Harris, Founder and Principal at Japan Foresight, provides keen insights into the fallout from Moody's recent downgrade of the U.S. credit rating. He discusses the possible ripple effects on Asian markets and trade dynamics, particularly between the U.S. and Japan. Explore how Japan might use its U.S. Treasury holdings as leverage in tariff negotiations. Harris also sheds light on the broader implications of U.S. fiscal challenges and the resilience of labor markets amidst shifting economic landscapes.
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Moody's Downgrade Impact Low
- Moody's downgrade of the US credit rating is likely a non-event for markets given previous downgrades by other agencies.
- S&P futures dipped slightly and US Treasury yields rose modestly, indicating possible short-term volatility without major disruption.
Bond Yields Rise Threshold
- Bond yields may rise due to the downgrade, but a significant increase over 4.80% on 10-year yields is unlikely.
- Financial institutions' exposure to Treasuries could pose risks only if yields break that higher threshold.
Trade Talks Drag with News Focus
- The US-China trade negotiation may drag on for months or years, with markets focused on news cycles.
- Recent positive headlines have eased worst-case global economic slowdown fears, adjusting market expectations.