TREASURIES-US yields rise after surprise Moody's downgrade

By Tatiana Bautzer

NEW YORK, May 16 (Reuters) - U.S. Treasury yields rose late on Friday after being down for most of the session, after ratings agency Moody's downgraded the U.S. government rating from AAA to AA1, saying the fiscal performance is likely to deteriorate.

Yields on U.S. 2-year Treasuries US2YT=RR accelerated a rise after the downgrade, and were up 2 basis points (bps) late on Friday at 3.993%. They climbed to a session peak of 4.012%.

Yields on benchmark 10-year notes US10YT=RR meanwhile, reversed the earlier drop and rose as high as 4.499%.

Moody's on Friday downgraded the credit rating of the United States by a notch to "Aa1" from "Aaa", citing rising debt and interest "that are significantly higher than similarly rated sovereigns."

Tom di Galoma, managing director at Minschler Financial, said the Moody's move was surprising.

"I think that is highlighting the problems on the budget talks in Congress, the bill failed to pass today in the House committee," he added.

On Friday, the bill failed to pass a vote in the House Budget Committee despite President Donald Trump's call for unity among Republicans.