Core Viewpoint - The downgrade of the U.S. sovereign credit rating by Moody's marks the end of the AAA era, highlighting structural issues in U.S. debt sustainability and raising concerns about the country's fiscal outlook [1][3][10] Group 1: Credit Rating Downgrade - Moody's downgraded the U.S. sovereign credit rating from "Aaa" to "Aa1," the first loss of the highest rating since 1919, indicating a significant shift in the perception of U.S. fiscal health [3][4] - The downgrade is attributed to the rising total debt, structural expansion of fiscal deficits, and increased interest payments amid a higher interest rate environment [3][4] Group 2: Market Reactions - Following the downgrade, there was a poor subscription for the 20-year Treasury bond auction, indicating rising financing pressures and a shift in market sentiment [1][4] - As of May 27, the 20-year Treasury yield fluctuated around 5%, while the 10-year yield remained at approximately 4.5%, reflecting heightened market concerns [1] Group 3: Structural Challenges - The U.S. debt sustainability is increasingly reliant on short-term debt refinancing, which exposes the financial system to significant vulnerabilities amid policy uncertainty and market volatility [4][5] - The current fiscal structure shows a growing dependency on short-term debt, which, despite its lower proportion, poses a critical risk due to its frequent issuance and reliance on market confidence [4][5] Group 4: Global Implications - The downgrade signals a potential reassessment of the risk-return profile of U.S. dollar assets by long-term investors, leading to increased allocations towards non-U.S. currencies and physical safe-haven assets [2][10] - The shift in the perception of U.S. Treasury securities as a "risk-free asset" could trigger a broader re-evaluation of asset pricing and liquidity expectations in global capital markets [10][11]