Moody’s Downgrade Hits US Credit Rating

Moody’s has downgraded the US long-term credit rating from “AAA” to “Aa1,” citing high debt levels and a widening budget deficit, marking the first time the US no longer holds the top rating from all three major agencies. The outlook was changed from "negative" to "stable."

The agency highlighted a decade-long rise in debt and interest payments, outpacing similarly rated countries. It warned that without tax or spending reforms, deficits could worsen significantly, with mandatory spending projected to hit 78% of total expenditures by 2035, CE Report quotes Anadolu Agency

The downgrade may raise borrowing costs and hurt economic growth, especially as 10-year bond yields already hover near 4.56%—the highest since 2008. Experts predict increased investor caution and a further shift away from the US dollar, which has already weakened this year.

Initial market reactions included a 1% drop in S&P 500 and long-term Treasury ETFs after hours, while gold gained 1%. The full market response is expected today.