Moody’s Ratings recently made a move that surprised absolutely no one (well, maybe a few people) by lowering the United States’ sovereign credit rating by one notch. The credit rating was downgraded from Aaa to Aa1, which is apparently a big deal in the world of finance. Moody’s cited the growing burden of financing the federal government’s budget deficit and the rising cost of rolling over existing debt as reasons for the downgrade. In other words, the U.S. government is in a bit of a financial pickle.
The decision to lower the credit profile of the United States could potentially lead to higher yields on U.S. Treasury debt. This means that investors might demand more return on their investment to compensate for the increased risk. As a result, sentiment toward owning U.S. assets, such as stocks, could take a hit. But hey, at least all the major credit rating agencies still think the U.S. is doing pretty okay overall, right? The yield on the 10-year Treasury note went up a bit in after-hours trading, and some ETFs took a hit. So, you know, things are happening in the financial world. Not really sure why this matters, but hey, that’s life.
Moody’s decision to downgrade the U.S. credit rating brings the agency in line with its rivals, who made similar moves in the past. Standard & Poor’s and Fitch Ratings had already downgraded the U.S. credit rating a while back. According to Moody’s analysts, the U.S. government has been struggling to agree on measures to address the growing fiscal deficits and interest costs. The country is facing a massive budget deficit, and things are not looking too great on the financial front. The analysts predict that federal deficits will widen, reaching nearly 9% of GDP by 2035. Yikes. So, yeah, the U.S. might need to figure some things out in the financial department. Just saying.
