By Matt Peterson
Credit-rating firm Moody's downgraded U.S. debt from its Aaa rating by one notch on Friday, citing successive administrations' failures to deal with rising U.S. debt and deficits.
Moody's decision means that all three major ratings firms have downgraded U.S. debt from top ratings. S&P Global Ratings was the first to do so more than a decade ago; Fitch Ratings shifted its rating to AA+ from AAA in 2023.
Moody's said the downgrade "reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns."
The firm added:
Successive 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 multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over 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's debt and interest burden higher. The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.
Moody's also changed its outlook on U.S. credit to stable from negative, citing the economy's strong growth potential, the dollar's "dominant" status as a reserve currency, and an assumption that the country's institutions and governance won't "materially weaken, even if they are tested at times."
The Treasury Department declined to comment.
Treasury yields jumped on the news. The yield on the 10-year Treasury jumped from 4.44% to 4.48% late Friday.
Write to Matt Peterson at matt.peterson@dowjones.com
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May 16, 2025 17:25 ET (21:25 GMT)
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