What does Moody have lowered US credit rating?

On Friday, Moody’s Ratings announced that the US government’s credit rating was reduced by transferring the National Debt of the Super Classification Agency, which may have an impact on a larger market.

Analysts use credit ratings to determine the creditworthiness of a board or company. Higher credit ratings at the top of or near the rating scale are considered less default risk than the lower part of the scale.

When classification agencies reduce the credit rating of the country or the company, it may act as a signal to the market that debt is more risky, which can lead to higher interest rates to compensate for extra risk. In the case of a federal government, this means more cost costs government debt.

According to the company, the discount « reflects the growth for more than a decade the debt of the state and interest rates to levels, which are significantly higher than the estimated sovereign. “

« Consecutive US administrations and congress have not agreed on measures to turn a large annual trend gap And increasing interest costs, « the company explained. » We do not believe that the perennial reductions on compulsory expenditure and deficit are due to current tax proposals. “

Moody’s calculates US credit rating over a growing debt

Reducing Moody’s US credit rating from AAA to AA1 on its 21-technology scale after the market ended on Friday, May 16th. During the trading on Monday 10-year-old Ministry of Finance reached its peak at 4.56%before the invoice to about 4.45%. Ten -year revenue started over 4.5% of the year, about 4.3% in most of March and April before this month rose.

Ten years will be used as a reference point for other interest rates, including mortgages and corporate loans.

Finance Minister Bessent rejects Moody’s credit discount as a « delayed indicator »

In March, Moody’s warned that the growth of national debt was becoming unsustainable and made the United States raised risk of discount. It wrote that « even in a very positive and low probability of economic and economic scenario, the reasonable price of the debt is significantly lower than that of other AAA classified and respected states. »

The company stated that the cost of interest on debt was projected to rise from 9 % of the federal turnover to 30 % from income by 2035. It added that while the US Treasury’s market and US dollar importance for its world reservation currency helped to support the AAA classification, it also saw « diminishing possibilities that these strengths continue to replace the financial -based Deplain and reduce the unreasonableness of the debts.

Moody’s reduction makes it a third of the three largest rating agencies to cut the US credit rating at the highest level.

US government’s taxable strength weakening, Moody’s Warns

In August 2023, FITCH ratings reduced its one -notch one of its highest « AAA » classification to « AA+ » and mentioned « erosion in administrative practices », which has led to repeated differences in the border of the federal loan.

Fitch said that federal deficits are already expanding and exacerbating great national debt and rising taxes threatening financial challenges Expenses for Social Security and Medicareparticipated in the change. It also said when it predicted a mild recession at the end of 2023 and early 2024, even though the US economy did not eventually slip into that period.

The US first debt discount took place in 2011 dead end in congress During the debate on expenditure cuts and debt, Standard and Poor’s (S&P) cut a credit rating from « AAA » to « AA+ » for tax concerns.

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S&P said that « a long -term controversy in raising the maximum amount of statutory debt and the associated philse policy debate » stated that an unlikely Congress restricts the growth of federal expenditure or to stabilize the federal government’s debt burden.