- Moody’s downgrades US credit rating, citing swelling national debt.
- Stock markets, including Sensex and Nifty, close lower amid global volatility.
- US Treasury yields spike as investors assess fiscal risks.
The US credit rating downgrade by Moody’s has triggered global financial tremors, with stock markets witnessing a decline and bond yields rising. The downgrade, reducing US debt to Aa1 from the top-tier Aaa, comes as the national debt swells to $36 trillion.
India’s Sensex shed 270 points, closing at 82,059, while the Nifty ended at 24,945, dragged down by losses in IT and FMCG stocks. In contrast, PSB and realty stocks bucked the trend, posting gains.
Market Turbulence Escalates as Moody’s Downgrades US Credit Rating
Moody’s downgrade of the US credit rating has injected fresh uncertainty into global financial markets, as investors weigh the implications of rising national debt. This marks the third major credit agency to lower the US rating, following similar moves by S&P in 2011 and Fitch in 2023. Treasury Secretary Scott Bessent downplayed the significance of the downgrade, labeling it a “lagging indicator” and emphasizing efforts to grow the economy faster than the debt.
US Treasury yields surged, with the 30-year yield exceeding 5% and the 10-year yield climbing to 4.54%. Investors may view the downgrade as a cue to offload bonds, further pushing down prices and increasing yields. Analysts point out that with borrowing costs already elevated, the US government faces mounting pressure to address its fiscal imbalances.
In India, the ripple effects were evident as the Sensex dropped 270 points and the Nifty closed below the 25,000 mark. The IT and FMCG sectors led the decline, while PSB and realty stocks outperformed. Market experts note that while the overall structure remains intact, traders should focus on selective buying in banking and auto stocks, which could lead the next leg of the rally.
Globally, the downgrade comes at a time of heightened market sensitivity, with economic data and corporate earnings under intense scrutiny. In the UK, borrowing costs jumped as the government sought to reset its trade relations with the EU. Meanwhile, European markets remained mixed, as the European Commission cut its eurozone growth forecast amid persistent inflationary pressures.
The global market reaction to the US credit downgrade underscores the fragile economic landscape, where fiscal risks and investor sentiment continue to shape financial market dynamics.
“In finance, everything that is agreeable is unsound and everything that is sound is disagreeable.” — Winston Churchill
