News on Monday that the US federal government’s fast-growing debt pile lost its final triple-A credit rating and new concerns for a volatile market. Long-term borrowing costs are rising and stocks are struggling.
Credit rating agency Moody’s stripped Washington of its temporary rating on Friday, downgrading the world’s largest economy by one notch to AA1, becoming the last three agencies to lower the US Triple A rating.
Moody’s said he hopes the US budget deficit will continue to rise as Donald Trump is trying to push his “big and beautiful” tax and spending bills through Congress.
“All US administrations and Congress have not agreed to measures to reverse the trend of large annual fiscal deficits and interest growth,” the agency said. “We don’t believe that multi-year reductions in mandatory spending and deficit material will arise from being based on current fiscal proposals.”
Trump administration officials have tried to downplay the importance of set-ups. “Moody’s is a metric to keep up,” Treasury Secretary Scott Bescent told NBC’s news agency Sunday.
The US president himself remains silent about the downgrade. On Monday morning, he used his true social platform posts to support his political rivals by criticizing celebrities such as Beyoncé and Bruce Springsteen who denounced Trump on the Manchester stage last week.
During the rare Sunday night vote, House Republicans increased Trump’s tax cuts and spending packages from major committees. The proposed invoice is estimated to add up to $500 million to the US $3.62 billion debt pile over the next decade.
On Wall Street, the benchmark S&P 500 fell 0.4% during early trading, while the high-tech NASDAQ composite fell 0.6%. The FTSE 100 had a drop of just 0.1% in London.
The bond market is also under pressure, with the yield on US Treasury bonds in 30 years reaching 5.026% from 13 basis points. As bond prices drop, yields rise. The increase shows investors are seeking higher profits to hold US debt. The dollar has weakened against a basket of currencies.
“We expect a bigger deficit over the next decade if government revenues remain flat significantly as eligibility spending rises,” Moody’s said. “In turn, a sustained, large fiscal deficit promotes high government debt and interest burdens. The US fiscal performance may compare with other highly rated sovereignty compared to its own past.”