J.P. Morgan: Moody's downgrade will push up U.S. interest costs.

Morgan Stanley strategist Jay Barry stated in a report that, in the long term, Moody's downgrade of the US rating could lead to an increase in interest expenses, causing prices of US bonds relative to overnight index swap rates of matching maturities to drop. They wrote in a report on Sunday that, given structural shifts in demand patterns and uncertainties in trade and monetary policy, short-term risks tend to be bearish. The volatility caused by this event should be less than the volatility seen after the tariff announcement on "Liberation Day" in early April, as investor positions are now more neutral and market fluctuations are less likely to exaggerate fundamentals as they did last month. The report also stated that, under the same conditions, Moody's downgrade of one notch should lead to a reduction of about 5 basis points in the 30-year swap spread. However, US bonds appear to have a higher risk premium than other similarly rated developed market sovereign bonds, indicating that the magnitude of price reduction may be smaller than what these coefficients suggest.