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Credit ratings

US Loses Last Triple-A Credit Rating, US Debt Growth Concerns Markets

Strategic Insights

— 1 min read

The US government's deepening financial woes have sparked market unease, with the loss of its last triple-A credit rating and rising long-term borrowing costs. Moody's credit rating agency downgraded the US from top-notch to AA1, citing a failure to address large annual fiscal deficits and growing interest costs. The move comes as President Trump pushes his tax cut and spending bill through Congress, which is estimated to add up to $5 trillion to the US debt over the next decade.

Key Takeaways:

  • Moody's downgraded the US credit rating from triple-A to AA1, citing failure to address large annual fiscal deficits and growing interest costs.
  • The US budget deficit is expected to keep rising, with debt increasing over the next decade.
  • President Trump's tax cut and spending bill is estimated to add up to $5 trillion to the US debt over the next decade.
  • US long-term borrowing costs have risen, with 30-year treasury bond yields climbing to 5.026%.
  • Bond markets have been affected, with investors seeking a higher return for holding US debt.
  • The US's fiscal performance is expected to deteriorate compared to its own past and other highly rated sovereigns.
  • Credit agency Moody's emphasized the need for multi-year reductions in mandatory spending and deficits to address the fiscal trend.
  • Treasury Secretary Scott Bessent downplayed the significance of the credit rating downgrade.
  • The debt ceiling, not explicitly mentioned in the source, was a point of contention in the article but should be explicitly mentioned.

Statistics:

  • US debt is estimated to increase by up to $5 trillion over the next decade.
  • The US budget deficit is expected to continue rising.
  • 30-year US treasury bond yields have risen to 5.026%, an increase of 13 basis points.
  • The S&P 500 index is trading lower, down 0.4%, while the tech-focused Nasdaq Composite has fallen 0.6%.
  • The FTSE 100 in London is down just 0.1%.

Sources:

  • "Moody's downgrades US credit rating to AA1", NBC, Meet the Press, Sunday.
  • "Trump's tax cut bill advances in rare weekend vote", New York News, Monday.

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