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Bond Market News
US Downgraded to Aa1 by Moody’s
May 19, 2025
The United States of America’s (USA) sovereign rating was downgraded to Aa1 from Aaa by Moody’s, with the outlook changed to stable from negative. Moody’s noted that increase in government debt for than a decade, and interest payment ratios being significantly higher than similarly rated sovereigns, contributed to the rating action. It added that successive US administrations and the Congress failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. It expects large fiscal deficits to drive the government’s debt and interest burden even higher. The fiscal deficit grew to $1.83tn in 2024. The stable outlook reflects balanced risks at Aa1, thanks to the Federal Reserve’s effective monetary policy. Moody’s is the last of the three major credit agencies to downgrade it from a AAA rating.
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