U.S. Treasury yields were mixed on Wednesday as investors considered the outlook for the economy after Fitch Ratings downgraded the U.S.’ long-term foreign currency issuer default rating on Tuesday.
At 4:07 a.m. ET, the yield on the 10-year Treasury was down by over one basis point to 4.0292% after hitting its highest level since early July on Tuesday. The 2-year Treasury yield was last trading close to four basis points lower at 4.8726%.
Meanwhile, the 30-year Treasury yield was up by less than a basis point to 4.1055%.
Yields and prices have an inverted relationship and one basis point equals 0.01%.
Investors assessed the state of the U.S. economy as Fitch Ratings cut the U.S.’ long-term foreign currency issuer default rating from AAA to AA+ on Tuesday.
The agency referenced “fiscal deterioration over the next three years” as well as issues with governance standards and pressures related to growing general debt. Fitch had first placed the U.S. on negative watch during the debt ceiling crisis earlier this year and referred to the tensions on Tuesday.
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” it said.
Investors also looked ahead to key economic data that could provide clues about what is ahead for the U.S. economy and monetary policy.
ADP’s employment change report for July is due Wednesday. Economists surveyed by Dow Jones are expecting an increase of 175,000, far below June’s 497,000 jump.
Further reports on the state of the labor market are due later in the week. The figures could inform the Federal Reserve’s next policy moves, especially regarding interest rates.
The central bank has been hiking interest rates since early 2022 in an effort to ease inflation and cool the economy, including the labor market. In recent months, Fed officials have repeatedly indicated that policy shifts ahead will depend on economic data.
