After Moody's downgraded the US rating, the mortgage bond spreads did widen slightly, but the extent was milder than expected. Fannie Mae and Freddie Mac-backed MBS widened 5-8 basis points in early trading, and the market response was relatively restrained. Some clients are skeptical about whether this indicates a trend reversal, while more believe it is just a short-term adjustment...

Morgan Stanley thinks the scope for a pullback is limited, with insufficient upward momentum in Treasury yields, and 4.5% may be a key level. The Federal Reserve's policy path has not changed, and the fundamentals have not deteriorated. However, the process of repricing risk premiums may last several weeks, especially considering the fiscal deficit issue that Moody's highlighted.

Interestingly, the market reacted much more violently the last time S&P downgraded the rating, and this time investors are clearly more calm. After all, everyone has become accustomed to it since 2011... Ultimately, it still depends on the direction of real interest rates and the Fed's attitude.