This weekend, the market focused on the event where Moody's downgraded the last AAA credit rating of US bonds to "AA1", officially causing the United States to lose the 3A rating from the three major credit rating agencies (Fitch and S&P had previously downgraded, with Moody's being the latest).
Upon this news, the 10-year US Treasury yield surged close to 4.49%, reaching a three-month high. Analysts warn that the downward trend of Taiwan's bond ETFs may intensify next week, causing bond investors to suffer significant losses.
Background of Credit Rating Downgrade and Market Direct Response
AAA, as the highest credit rating symbol, typically represents an issuer's extremely strong debt repayment ability and extremely low risk. This downgrade of the US sovereign debt rating primarily reflects the rating agencies' deep concerns about the continuously growing national debt scale, severe fiscal deficit situation, and future fiscal sustainability.
The impact of this rating downgrade should not be underestimated, and its potential chain reaction is worth noting.
First, the US government's future borrowing costs may face upward pressure because investors will naturally demand higher returns when they perceive increased risks. Second, this event may shake global investors' confidence in US Treasuries as a traditional safe-haven asset. For Treasury bond investors, the decline in bond prices directly affects their investment portfolio performance.
According to statistics, 11 Taiwan stock ETFs related to US bonds hit new lows since listing this week, including Fubon 20-Year US Treasury, Uni-President 20-Year US Treasury, Hua Nan Excellent US Public Bonds 20-Year, etc.
Since many market participants believed buying US bonds was equivalent to risk-free arbitrage and even used leverage for investment, the recent significant price drop has caused substantial losses for many investors.
How Will It Affect the Market?
Regarding the US losing its 3A credit rating, Franklin Templeton's Deputy Chief Investment Officer Hochman stated: The US losing its top credit rating may lead to a dangerous bear steepening of the bond market (long-term bond yield rising more than short-term bond yield), further putting downward pressure on the US dollar and reducing the attractiveness of US stocks, with large investors gradually shifting to alternative safe assets replacing US Treasuries.
Some analysts believe that the recently strong stock market might experience a profit-taking wave. However, on the other hand, this might not be bad news for cryptocurrencies like Bitcoin, as the reduced trust in US Treasuries could further enhance Bitcoin's safe-haven asset attributes.
① Bond Market:
Long-term bond yield range moves up, and if inflation does not cool down quickly, long-term bonds will enter a phase where "no one wants to catch the knife"
Risk continues to expand, and institutional investors will tend more towards short-term bonds or money market instruments
② Stock Market:
High yield = increased capital costs → Significant pressure on technology and growth stocks
If the bond market continues to be out of control, it may trigger a reallocation of stock market funds
③ Crypto Assets and Gold:
Traditional safe-haven assets (such as bonds) are no longer safe
→ The narrative of Bitcoin and gold as "alternative storage tools" may heat up
→ We have already seen BTC strengthen after yield jumps
