Treasury yields rise; stocks, dollar fall amid tax bill, US downgrade focus

Longer-dated Treasury yields gained while global stock indexes and the dollar eased on Monday amid concerns about a US tax bill and the US debt load and following Moody's downgrade of the US sovereign credit rating.

Late on Friday, Moody's Investors Service cut the United States' sovereign credit rating from the top "Aaa," drawing attention to the country's deteriorating fiscal outlook.

US President Donald Trump's sprawling tax-cut bill received approval from a key congressional committee on Sunday. Republicans who control the US House of Representatives will try to push the bill toward passage this week.

The 30-year Treasury yield hit an 18-month high, with investors concerned that the tax bill will increase the debt load by more than previously expected. The 30-year bond yield was up 9.4 basis points at 4.992 per cent after touching 5.037 per cent, the highest since November 2023.

"What Moody's did was really more symbolic than anything else. The other agencies had already downgraded the debt," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"Yes, yields are moving higher on the news, and could spike a bit higher. But they are moving up for other reasons as well," he added. "In general the (stock) market is not really reacting all that much to the Moody's announcement. Rather, it's a market that's come up and is looking to perhaps consolidate its recent moves."

US Treasury Secretary Scott Bessent used television interviews on Sunday to dismiss the Moody's downgrade, while warning trade partners they would get maximum tariffs if they did not offer deals in "good faith".

Bessent heads to a G7 meeting this week for more talks.

The Dow Jones Industrial Average fell 59.42 points, or 0.15 per cent, to 42,592.31; the S&P 500 fell 24.46 points, or 0.41 per cent, to 5,933.92; and the Nasdaq Composite fell 119.50 points, or 0.62 per cent, to 19,091.89.

The S&P 500 had registered its fifth straight day of gains on Friday.

MSCI's gauge of stocks across the globe fell 1.73 points, or 0.20 per cent, to 878.89. The pan-European STOXX 600 index fell 0.17 per cent, while Europe's broad FTSEurofirst 300 index fell 3.99 points, or 0.18 per cent

MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 0.5 per cent.

A mixed bag of Chinese data showed the economy there was struggling.

Trump's tariff war has sapped consumer sentiment, and analysts will be scouring earnings from Home Depot and Target this week for an update on spending trends.

Trump said on Saturday that Walmart should "eat the tariffs" after the world's largest retailer said it would have to start raising prices due to the levies.

The US dollar weakened broadly, hitting a more than one-week low against the safe-haven yen, Swiss franc and euro. Against the Japanese yen, the dollar was down 0.38 per cent at 145.06.

US RATES NOT FALLING SO FAST

Atlanta Federal Reserve president Raphael Bostic said in comments to CNBC on Monday the central bank may only be able to cut interest rates by a quarter point over the rest of the year given concerns about rising inflation stoked by higher import taxes.

In an interview published over the weekend, European Central Bank President Christine Lagarde said the dollar's recent decline reflected a loss of confidence in US policies.

In commodities, US crude rose 0.24 per cent to $62.64 a barrel and Brent rose to $65.45 per barrel, up 0.06 per cent on the day. Spot gold rose 1 per cent to $3,234.34 an ounce. US gold futures rose 1.54 per cent to $3,231.10 an ounce.

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