Article Summary
Moody’s downgraded the US credit rating with only 10 minutes left to trade, causing some last minute selling in the bond market. This is not the first time a ratings agency has made such a move, but the timing added to the market volatility. Bonds were generally flat until the downgrade, with selling picking up slightly after the highest reading on inflation expectations since 1981.
What This Means for You
- Be aware of last minute market volatility caused by rating agency downgrades.
- Even with a downgrade, bonds remained relatively stable until the announcement, indicating that the market had priced in some level of risk beforehand.
- Keep an eye on inflation expectations, as they can impact bond trading and potentially lead to increased market volatility.
- Stay informed about key economic indicators and market events, as they can influence bond market movements and credit ratings.
Original Post
Moody’s Pulls Pin And Walks Away With 10 Minutes Left to Trade
Fri, May 16 2025, 5:26 PM
Bonds began the day stronger after a gentle overnight rally. Selling commenced at 9:30am for the 4th day in a row and picked up slightly after the highest reading on inflation expectations since 1981. Even then, losses were modest at best and bonds were generally flat/unchanged until the very end of the day. With carefully considered timing, Moody’s pulled the pin and walked away with 10 minutes left to trade. The grenade in this case was a downgrade of the US credit rating. This move is certainly in the ratings agencies’ playbooks amid congressional budget battles, but most notably all the way back in 2011. Also of note, Moody’s was the last of the big 3 to have the US at a triple A rating, so while it’s not the craziest thing that ever happened to bonds, the timing made for some last minute selling ahead of the 5pm cut-off.
Key Terms
- Moody’s
- US credit rating
- Bond market
- Inflation expectations
- Rating agency downgrades
- Market volatility
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