TradingKey - Last FridayMoody'sFollowing the downgrade of the United States' last AAA sovereign credit rating, global investor panic soared due to concerns about the U.S. fiscal sustainability. On Monday, May 19, the VIX fear index surged 15%.
As of press time, the VIX fear index was up 12.06% at 19.32. The VIX index reached a historic high of 60 before Trump's reciprocal tariffs took effect in April, but subsequently fell sharply as tariff trade negotiations began.
The VIX fear index measures investors' expectations for the next 30 trading days.S&P 500The higher the expected value of index volatility, the higher the market risk.
The recent surge in the VIX index was triggered by Moody's downgrading the US sovereign credit rating, resulting in the US losing its last top AAA rating. The reason given was that the US debt burden had increased and the fiscal deficit could worsen further.
After losing their high credit ratings, US Treasury investors will demand higher yields to compensate for greater potential risks, especially for long-term US Treasury bonds. On the 19th, the 30-year US Treasury yield continued to rise, currently at 5.03%, the highest since October 2023. This seems unusual given the Federal Reserve's rate-cutting cycle, in which it has already cut rates three times.
If interest rates continue to rise, the difficulty and cost of borrowing in the United States will further increase, potentially leading to an a vicious circle in the unsustainability of the US fiscal system.JPMorgan ChaseAnalysts say this is a reminder that the cost of delaying fiscal issues will be enormous.
In pre-market trading, major stock index futures fell across the board, with S&P 500 futures down more than 1%.
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