TradingKey-on FridayMoody'sAfter the downgrade of the last AAA sovereign credit rating of the United States, global investor panic soared due to concerns about the fiscal sustainability of the United States. On Monday, May 19, the VIX panic index rose 15%.
As of writing, the VIX Panic Index rose 12.06% to 19.32. The VIX index reached a historic high of 60 before Trump's reciprocal tariff came into effect in April, and then dropped sharply due to the successive launch of tariff trade negotiations.
The VIX fear index measures investors' expectations for the next 30 trading daysS&P 500The greater the expectation of index volatility, the higher the market risk.
The trigger for this surge in the VIX index was that Moody's, an international rating agency, downgraded the sovereign credit rating of the United States, which caused the United States to lose its last highest rating of 3A, on the grounds that the debt burden of the United States increased and the fiscal deficit might worsen further.
After losing their high credit rating, U.S. bond investors will demand higher yields to compensate for greater potential risks, especially long-term U.S. bonds. On the 19th, the 30-year US Treasury yields continued to rise and is now at 5.03%, the highest since October 2023. This is unusual in the interest rate cut cycle in which the Federal Reserve has cut interest rates three times.
If interest rates continue to rise, the difficulty and cost of borrowing in the United States will further increase, which may lead to the problem of financial unsustainability in the United States falling into an a vicious circle.JPMorgan ChaseAnalysts said that this is a reminder that the cost of delaying financial problems will be huge.
Before the U.S. stock market opened, major stock index futures fell across the board, with S&P 500 futures falling more than 1%.
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