What does it mean that Moody’s downgraded the United States credit rating?

On Friday, MOODY rankings announced a reduction in the US government’s credit rating, which transferred it to a first -class level in the classification agency amid concerns about the increasing national debt, which could have effects on the largest market.

Credit assessments are used by analysts to determine the credit wall of the debts issued by a government or company. Top credit assessments in or near the top of the evaluation scale are seen as lower virtual risks than those on the bottom end of the scale.

When the evaluation agencies reduce the credit classification of a country or company, it can serve as a sign of the market that the debt is more dangerous, which may lead to high interest rates to compensate for additional risks. In the case of the federal government, this means more spending on the costs of interest in the national debt.

The company said that the reduction “reflects the increase that exceeds a decade in government debt rates and pay benefits to much higher levels of kings classified.”

“The successive American administrations and congress have failed to agree on measures to reflect the direction of the large annual financial deficit and the increasing interest costs,” the company explained. “We do not believe that the multiple discounts of the year in spending and mandatory deficit will result from the current financial proposals.”

MOODY reduces the American credit rating on the height of debt

MOODY classification for American credit classification from AAA to AA1 was announced on a scale of 21 witnesses after the market was closed on Friday, May 16. During the trading session on Monday, the return on the treasury bonds of 10 years reached 4.56 % before it decreased to about 4.45 %. The return began over 10 years a year above 4.5 %, and it was about 4.3 % in most of March and April before this month’s rise.

10 years are used as a standard for other interest rates, including mortgages and corporate bond returns.

Treasury Secretary Payet refuses to reduce credit in Moody’s in the United States as a backward indicator.

Congress studies a tax package that can expand the deficit in the coming years. (Saul Lub/AFP via Getty Images)

In March, Moody’s warned that the growth of national debt has become unnecessary and exposes the United States to a great risk of reduction. He wrote that, “Even in a very positive and financial scenario, the ability to withstand debt costs is still weaker material than other AAA angels and connected to a high degree.”

The company noted that the cost of interest payments on debt is expected to increase from 9 % of federal revenues to 30 % of revenues by 2035. He added that although the importance of the American Treasury and the US dollar as a global reserve helped support the AAA classification, it also agrees, “This force that continues this force to displace the Fiscal that digs it.”

Moody’s rating reduces it is the third of the three main rating agencies to reduce the American upper credit rating.

The financial strength of the United States government is deteriorating, Moody’s warning

Treasury Secretary Scott Payet refused to reduce mood as a “late indicator”. (Andrew Harnik/Getty Images)

In August 2023, Fitch Ratings reduced the United States classification from its highest classification from “AAA” to “AA+” and pointed to the “erosion of government”, which led to repeated approvals according to federal debt.

Fitch said that the federal deficit expands and leads to the exacerbation of the great national debt, as well as the financial challenges that are looming on the horizon that was presented by increasing spending on social security and medical care, in this step. He also said at a time he expected a slight stagnation in late 2023 and early 2024, although the American economy did not eventually slip in that period.

The first American debt classification occurred in 2011 amid a dilemma in Congress during a discussion of spending cuts and unit, as Standard and Poor’s (S&P) reduced the credit rating from “AAA” to “AA+” on financial concerns.

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“The long controversy over raising the ceiling of legal debt and relevant financial political discussion,” said the S&P.