Jason Katz analyzes the stock market after Moody’s credit rating on “Varney & Co.”, Managing Director of UBS and senior portfolio manager.
Moody’s ratings on Friday announced the downgrade of the US government’s credit rating, taking a notch below the top level of the rating agency amidst concerns about the rising national debt, which could be implications for the larger market.
Credit ratings are used by analysts to determine the credit of loan issued by a government or corporation. The ratings are seen to be less than the default risk at the top of the scale or at the lower end of the scale at the lower end of the scale.
When rating agencies dowry the credit rating of a country or company, it can serve as a sign for the market that the debt is risky, resulting in high interest rates to compensate for additional risk. In the case of the federal government, this means that more spent on interest costs National debt,
The firm said that downgrade “reflects an increase of more than a decade Government loan And the interest payment ratio for those levels that are much higher than the equally rated sovereign. ,
“Continuous US administration and Congress have failed to agree on measures to reverse the trend of large annuals. Fiscal deficit And rising interest cost, “the firm explained.” We do not believe that the existing fiscal proposals will result in multi-year deficiency as a result of compulsory expenses and multi-year cuts in deficit. ,
Moody’s on rising loans dows the US credit rating
The American credit rating has been downed by all three major rating agencies since 2011. (Samuel Korum/Getty Images)
After the market closure on Friday, 16 May, the downgrade of Moody’s from AAA to AA1 from AA1 to AA1 was announced by the downgrade of Moody’s. During Monday trading session, yield on benchmark 10-year-old treasure bond Around 4.45% reached 4.56% before declining. The start of a 10-year yield started from more than 4.5%, it was about 4.3% for most of March and April before it moves this month.
10 years are used as a benchmark for other interest rates, including mortgage and corporate bond yields.
Treasury Secretary Besant rejected Moody’s US Credit Downgrade as ‘Lagging Indicator’
The Congress is considering a tax package that may increase deficit in the coming years. (Through Saul Loaib/AFP Getty Image)
In March, Moody warned that the rise of national debt was getting unstable and raised America Risk of fallIt wrote that, “Even very positive and less likely in the economic and financial scenario, the sap of debt remains physically weak compared to other AAA-rated and upper class sovereignty.”
The firm said that the cost of interest payment on loans was estimated to increase from 9% to 30% revenue of federal revenue by 2035. It said that the US Treasury market and the importance of US dollars helped support the AAA rating as a world reserve currency, it also helps to promote low probability, which will continue to overcome the shortage of loans. ,
Dowgrad by Moody has made it a third of the three major rating agencies to cut the US credit rating from the top level.
US government’s fiscal power deteriorates, Moody’s warning
Treasury Secretary Scott Besent dismissed Moody’s downgrade as a “lagging indicator”. (Andrew Harnik/Getty Images)
In August 2023, Fitch ratings downed a rungs from the highest rating of “AAA” to the US to “AA+” and cited “erosion of governance”, causing frequent deadlock over the federal debt border.
Fitch said the federal deficit already widened and increased the big national debt, as well as faced fiscal challenges. Social security and cost spentContributed to this step. It was also stated that at that time it was estimated to have a mild recession in the end of 2023 and early 2024, although the US economy eventually did not slip into the recession in that period.
The first American debt downgrade was between one in 2011 Deaddema in Congress During a debate on spending cuts and debt range, the credit ratings from “AAA” to “AA+” on fiscal concerns as standard and poor (S&P).
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The S&P stated that “long -term controversy over the statutory debt limit and extending the related fiscal policy debate” indicated that it was unlikely to reduce the increase in federal expenditure or stabilize the burden of the federal government’s debt.
