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Global stock markets witnessed a selling wave following the downgrade of #America's credit rating from the highest investment grade and its implications on the U.S. sovereign bond market.. So what happened?
📌 Moody's downgraded the credit rating of the United States from "Aaa" to "Aa1", joining "Standard & Poor's" and "Fitch" which downgraded the rating in 2011 and 2023 respectively.
📌 This downgrade reflects the concerns of credit rating agencies over the deterioration of the U.S. government's ability to repay its debts in the long term.
📌 This concern translated into fears among investors about a decline in confidence in U.S. financial solvency, prompting them to sell U.S. government debt.
📌 This selling wave caused a decline in bond prices, leading to an increase in yields; due to the inverse relationship between prices and bond yields.
📌 The rise in U.S. Treasury yields raises borrowing costs for the government and companies, putting pressure on high-risk assets like stocks in favor of safe havens like gold.
