U.S. Credit Downgrade Sparks Potential Yield Surge and Dollar Uncertainty

A recent downgrade of the U.S.’s credit rating is expected to lead to increased long-term Treasury yields, potentially reaching 5% in the coming year. This development has triggered market shifts with growing concerns about the dollar’s safe-haven status. Economic expert Mansoor Mohi-uddin from the Bank of Singapore predicts a rise in long-term U.S. Treasury yields as a consequence of the U.S.’s deteriorating fiscal situation. These potential yield increases could put pressure on the Federal Reserve to keep interest rates high and raise inflation concerns, leading to more volatility in both the bond market and foreign exchange markets.