Reuters
7 min read
NEW YORK (Reuters) - Moody's on Friday downgraded the credit rating of the United States by a notch to "Aa1" from "Aaa", citing rising debt and interest "that are significantly higher than similarly rated sovereigns."
U.S. President Donald Trump's sweeping tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress.
As written, the bill would add trillions of dollars to the federal government's $36.2 trillion in debt over the next decade.
"Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's said in a statement.
U.S. Treasury securities fell and yields rose late Friday after the news.
COMMENTS:
CHUCK SCHUMER, SENATE DEMOCRATIC LEADER, UNITED STATES SENATOR FROM NEW YORK
“Moody’s downgrade of the United States’ credit rating should be a wake-up call to Trump and Congressional Republicans to end their reckless pursuit of their deficit-busting tax giveaway.
“Sadly, I am not holding my breath – today’s GOP simply does not care about deficits or our nation’s fiscal health. Republicans are hell-bent on a multi-trillion tax cut for the ultra-wealthy, leading to nothing but higher prices, more debt, and fewer jobs.
LAWRENCE GILLUM, CHIEF FIXED INCOME STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA
"The downgrade isn’t altogether surprising. Moody’s hinted at the move as early as 2023 when it downgraded the outlook from stable to negative. But now that the US has officially lost the last of its AAA/Aaa ratings (from the main three rating agencies), we hope Congress and the Trump administration take this action seriously and reign in deficit spending. We’ll see how the bond market reacts on Monday but if the move is muted, it's unlikely it will have much impact. Unfortunately, unless/until the bond market pushes back aggressively in the form of higher yields, it’s unlikely Washington will take this recent downgrade seriously. We hope we’re wrong."
CAROL SCHLEIF, CHIEF MARKET STRATEGIST, BMO PRIVATE WEALTH, MINNEAPOLIS
“Moody’s is the last of the big three ratings agencies to drop the U.S. credit rating down a notch – so not entirely shocking. It may at the margin give investors a bit of pause – especially after the exuberant run this week that pushed US indexes back to basically neutral on the year (NASDAQ up 7% alone this week and S&P up 5%).”
