U.S. Treasury yields surged to multi-year highs on Thursday, driven by growing fiscal pressures and weak demand at recent bond auctions. Notably, the 20-year Treasury auction required a 5.047% yield to attract buyers—highlighting investor caution amid rising debt levels and Moody’s recent downgrade of the U.S. credit rating from AAA to AA1.

Fiscal Risk Threatens Market Sentiment

According to data from FiscalData.Treasury.gov, the total U.S. gross national debt stood at approximately $36 trillion as of May 2025. Of this, around $9.2 trillion in Treasuries—about one-third of all marketable debt—is set to mature this year, with more than half due before July.

Historically, the U.S. has managed high debt levels thanks to economic resilience and the dollar’s global dominance. However, the recent reintroduction of tariffs under former President Trump’s policy framework has raised fresh concerns. Uncertainty over the economic impact of these trade measures could weigh on growth and government revenues, potentially turning what was once manageable debt into a broader fiscal risk.

As investors reassess the U.S. fiscal outlook, market sentiment could shift, triggering further volatility in yields, the dollar, and risk assets.

U.S. Dollar Weakens Further

The U.S. Dollar continued to weaken this week, as persistent fiscal concerns kept investor sentiment bearish. The Dollar Index once again slipped below the key 100 level—a signal many views as bearish for the greenback.

Although there hasn’t been a major wave of selling yet, the 100 level appears to be a key battleground. 

Some buying support is still evident, but with growing fiscal risks and policy uncertainty, upside potential looks limited. Even if the Dollar finds temporary support above 100, it may struggle to break above the 101.50 resistance zone.

Should the 100-level turn into firm resistance, the risk of further downside increases. Overall, the U.S. Dollar remains in a consolidation phase with a bearish bias.

U.S. Equities May Face Renewed Headwinds

U.S. equities are showing signs of pressure, with the S&P 500 extending a three-day losing streak this week amid a sharp rise in Treasury yields. While the broader market remains resilient—major indices are still holding above key bullish levels—mounting macroeconomic risks could weigh on sentiment.

Investors remain cautiously optimistic, but persistent fiscal concerns, rising yields, and a weakening U.S. Dollar pose potential headwinds. Additionally, ongoing uncertainty around Trump’s tariff and trade policies adds to the risk landscape. These factors may limit further upside for U.S. equities in the near term.

The SPX500 is facing resistance below the 6000 mark, with recent price action showing signs of hesitation. While the index has managed to hold above the key 5700 support zone—indicating resilience in U.S. equities—the broader outlook remains cautious.

A sustained move above 6000 is needed to confirm bullish momentum. However, if the 5700 level fails to hold, downside pressure may re-emerge, potentially signaling a deeper correction ahead.