The big concern for markets last week was rapidly rising government bond yields. This was most prominent in the United States where a US$3 trillion plus budget deficit needs to be funded this year. The trigger for the markets' fears, which resulted in a large sell-off in both equity and government bond markets mid-week, was S&P's move the week before to revise the outlook on the 'AAA' rating assigned to the United Kingdom, to negative. That move generated fresh questions over whether the United States could also be in danger of losing its 'AAA' rating. How could the country complete its massive bond sales then and at what cost?Moody's moved on Wednesday to assuage the market's concerns, issuing a detailed report on why the United States' 'Aaa' rating is not at risk. This was intended to reinforce verbal assurances that had been given late the week before.Moody's said even with the significant deterioration in the US government's debt position, its rating has a stable outlook and demonstrates the attributes of an 'Aaa' rated sovereign. "These attributes include a diverse and resilient economy, strong government institutions, high per capita income, and a central position in the global economy." It is the last point that is the critical one. If the US dollar was not the world's major reserve currency, the other factors would count for little. Relativity also seems to be part of the argument. Moody's noted that while the US government's debt ratios are deteriorating, they are doing so in most other advanced economies too, due to the global recession. But Moody's does warn that while its outlook for the US rating is stable, a reassessment of the long-term growth prospects of the economy and the ability of the government to return to a sustainable debt trajectory could put negative pressure on the rating in the future. How the economy and fiscal policy fare after the recession will be key. Also, over the longer term, contingent liabilities related to Social Security and Medicare programs could also pressure the rating.As it was, Moody's comments didn't seem to provide too much reassurance as the 10-year bond yield continued to rise to 3.73 per cent, a level not seen since mid-November last year. It was the completion of a US$26 billion, seven year, bond auction that seemed to reassure the market and saw bond yields ease somewhat. Moreover, while this auction met with a lacklustre response from investors, with the clearing yield being a little higher than pre-auction indications, it also concluded a series of auctions that saw a total of US$101 billion of bonds sold. There was relief that the bonds were sold without any hiccups. It is not fear of a financial melt-down or default that is driving the markets now - as the chart above shows, CDS spreads (supplied by Markit Group) for US sovereign risk are well off their mid-March highs - it is simple demand and supply and in this case, supply is going to run well ahead of