Moody’s Strips the US of Its Last Triple‑A Credit Rating
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Moody’s Ratings has lowered the US sovereign credit rating to Aa1 from Aaa, removing the nation’s final AAA rating and aligning it with Fitch and S&P.
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The agency cited “declining fiscal metrics” driven by a ballooning federal deficit and record‑high US national debt, now exceeding GDP.
Why Moody’s Cut the Rating
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Persistent budget deficits near $2 trillion a year (≈6% of GDP).
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Surging interest payments as higher Treasury yields lift borrowing costs.
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Lack of political consensus to curb spending or raise revenue, with Congress currently debating a multi‑trillion‑dollar tax‑and‑spend bill.
Market Reaction: Yields Edge Higher
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10‑year Treasury yields briefly touched 4.49% after the downgrade, signaling investors may demand higher returns for holding US debt.
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An S&P 500 ETF fell in after‑hours trade, reflecting broader concern over the US fiscal outlook.
Political and Industry Response
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The White House dismissed the move as politically motivated, while Moody’s insisted the cut reflects long‑term fiscal realities.
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Portfolio managers warn that if investors start questioning the “safe‑haven” status of Treasuries, borrowing costs could climb further, compounding the deficit problem.
What’s Next for the US Economy?
| Key Metric | 2024 | 2029 (CBO forecast) | 2035 (Moody’s projection) |
|---|---|---|---|
| Debt‑to‑GDP | ~100% | 107% | ~120% |
| Deficit‑to‑GDP | 6.4% | ~7–8% | ~9% |
| Interest‑to‑Revenue | 14% | 20% | 25%+ |
Higher entitlement spending, elevated rates, and modest revenue growth underpin these projections.
Bottom Line
The US credit rating downgrade underscores mounting concern among global investors that Washington’s debt trajectory is unsustainable. Unless policymakers curb spending or boost revenue, the cost of funding America’s debt may keep rising—potentially eroding the country’s status as the world’s premier investment safe haven.
