Forget budget deficits — these other factors are bigger drivers of Treasury yields, market expert says

• Federal deficits aren't the primary driver of US Treasury yields, DataTrek analysts said.
• Instead, Fed policy, inflation, and global investors' preferences matter more to bond yields.
• That comes after Moody's lowered the US credit outlook to "negative" on Friday.

Federal deficits aren't the primary driver of Treasury yields, DataTrek analysts said, after Moody's Investors Service cut its outlook on US credit from "stable" to "negative."

Instead, monetary policy, structural inflation pressures, and global investors' preferences matter more to bond yields, they wrote in a note issued Sunday.

"Rating agencies have an important role in capital markets, but their decisions should not be the only factor in how asset owners choose to allocate capital," the note said.