Friday after the close, Moody's lowered 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&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.

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.

US 10s daily
US 10s daily

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.

There are no coupon auctions this week but next week, we get 2s, 10s and 20s.

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.