{"id":137921,"date":"2025-05-18T18:16:00","date_gmt":"2025-05-18T18:16:00","guid":{"rendered":"https:\/\/quixnet.net\/wpinstance\/us-credit-rating-downgrade-could-add-to-pressure-on-government-debt-the-guardian\/"},"modified":"2025-05-18T18:16:00","modified_gmt":"2025-05-18T18:16:00","slug":"us-credit-rating-downgrade-could-add-to-pressure-on-government-debt-the-guardian","status":"publish","type":"post","link":"https:\/\/quixnet.net\/wpinstance\/us-credit-rating-downgrade-could-add-to-pressure-on-government-debt-the-guardian\/","title":{"rendered":"US credit rating downgrade could add to pressure on government debt – The Guardian"},"content":{"rendered":"

Loss of Moody\u2019s triple-A rating comes amid concerns about fiscal trajectory and widening budget deficit
US government debt may come under more pressure this week after the credit ratings agency Moody\u2019s stripped the US of its top-notch triple-A rating.
Moody\u2019s dealt a blow to Washington last Friday, when it downgraded the US and warned about rising levels of government debt and a widening budget deficit. It cut its US credit rating by one notch to AA1, becoming the last of the big three agencies to downgrade the country from a triple-A rating.
The move comes as concerns about the US\u2019s fiscal trajectory have risen. The US national debt now stands at $36tn (\u00a327tn), and economists fear that Donald Trump\u2019s \u201cone big, beautiful bill<\/a>\u201d \u2013 which was blocked by rightwing lawmakers last Friday \u2013 could push the deficit higher by cutting taxes.
Explaining its decision, Moody\u2019s said it expected the US budget deficit to keep rising, and criticised US politicians for not taking action to improve the country\u2019s fiscal position.
\u201cSuccessive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multiyear reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,\u201d Moody\u2019s said.
\u201cOver the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government\u2019s debt and interest burden higher. The US\u2019s fiscal performance is likely to deteriorate relative to its own past and compared with other highly rated sovereigns.\u201d
The US treasury secretary, Scott Bessent, tried to brush the downgrade aside on Sunday, telling NBC\u2019s Meet the Press show: \u201cMoody\u2019s is a lagging indicator.\u201d
Investors are hopeful that the move will not have a lasting market impact, although it will focus attention on US debt levels.
Mohamed El-Erian, the chief economic adviser at Allianz, posted on X: \u201cWhile this is historic and will attract media attention, its market impact is likely to be contained.\u201d
US government debt has weakened over the last few years; prices have fallen, pushing up the yield, or interest rate, on 10-year Treasury bonds to almost 4.5%. Yields rise when prices fall.
There may now be more selling pressures, as \u201cthe downgrade may indicate that investors will demand higher yields on treasuries\u201d, Tracy Chen, a portfolio manager at Brandywine Global Investment Management, told Bloomberg.
However, Toby Nangle, the former head of asset allocation at Columbia Threadneedle, said regulators did not tend to differentiate between triple-A and AA1 when setting capital risk weights. That means banks\u2019 risk-weighted capital asset calculations look unlikely to be affected by the rating change.
\u201cSo, does the downgrade matter to financial plumbers this time? From a mechanical perspective, the answer is almost certainly \u2018not at all\u2019,\u201d Nangle wrote in the Financial Times<\/a>.
Stock markets fell heavily in 2011 after S&P became the first big credit agency to strip the US of its credit rating, with the S&P 500 index dropping more than 6% the next trading day<\/a>.
Markets also fell in 2023<\/a> when Fitch lowered its rating on the US<\/a> by one notch, from triple-A to AA+.
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This time, the IG market analyst Tony Sycamore reported there were \u201conly minor risk aversion via IG\u2019s weekend markets, with gold trading 0.27% higher at $3210 and Nasdaq futures down -0.38%\u201d after Moody\u2019s announcement.
Carol Schleif, the chief market strategist at BMO Private Wealth, suggested Moody\u2019s downgrade could make investors more cautious.
\u201cThe bond market has been keeping a sharp eye on what transpires in Washington this year in particular,\u201d Schleif said.
The White House communications director, Steven Cheung, criticised the downgrade, claiming: \u201cMark Zandi, the economist for Moody\u2019s, is an Obama adviser and Clinton donor who has been a Never Trumper since 2016.\u201d
Zandi, though, is the chief economist of Moody\u2019s Analytics, not of its ratings arm.
Some investors pointed out that the US could not be forced to default on its debt, as it issued the US dollar.
\u201cLet\u2019s get real. If there\u2019s one asset on this planet with the least chance of default, it\u2019s a US Treasury bond,\u201d said Stephen Innes, the managing partner at SPI Asset Management.
\u201cThe US government issues debt in a currency it prints and controls, and it owns the global reserve currency. You don\u2019t default when your central bank can conjure up settlement liquidity with a keystroke. It\u2019s not moral hazard \u2013 it\u2019s just an operational fact.\u201d<\/p>\n

source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Loss of Moody\u2019s triple-A rating comes amid concerns about fiscal trajectory and widening budget deficitUS government debt may come under more pressure this week after the credit ratings agency Moody\u2019s stripped the US of its top-notch triple-A rating.Moody\u2019s dealt a blow to Washington last Friday, when it downgraded the US and warned about rising levels […]<\/p>\n","protected":false},"author":1,"featured_media":137922,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-137921","post","type-post","status-publish","format-standard","has-post-thumbnail","category-us","entry"],"_links":{"self":[{"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/posts\/137921","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/comments?post=137921"}],"version-history":[{"count":0,"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/posts\/137921\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/media\/137922"}],"wp:attachment":[{"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/media?parent=137921"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/categories?post=137921"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quixnet.net\/wpinstance\/wp-json\/wp\/v2\/tags?post=137921"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}