The structural demand for U.S. debt which underpins the dollar-based global financial system remains strong against the backdrop of recent Treasury market volatility, Moody's Investors Service said on Monday.

The firm added U.S. financial regulators have undertaken a series of measures to improve Treasury market resilience and efficiency, and that it expects the market structure will continue to evolve.

"Going forward, as the Fed reduces its Treasury holdings, foreign central banks, pension funds, insurance companies and households will be stabilizing factors in the market," Moody's said in a client note.

Earlier this month, Moody's lowered its outlook on the U.S. credit rating to "negative" from "stable" citing large fiscal deficits and a decline in debt affordability.

Federal spending and political polarization have been a rising concern for investors, contributing to a selloff that took U.S. government bond prices to their lowest levels in 16 years in mid-October.

Treasury yields have soared this year on expectations the Federal Reserve will keep monetary policy tight, as well as on U.S.-focused fiscal concerns.

(Reporting by Manya Saini in Bengaluru; Editing by Shounak Dasgupta)