Moody’s Changes Outlook on U.S. Ratings to Negative
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Moody’s Investors Service on Friday said it was revising the outlook on the U.S. government’s ratings to negative, while affirming the long-term issuer and senior unsecured ratings at Aaa.

Moody’s said a key driver to the outlook change was its assessment that downside risks to the nation’s fiscal strength have increased “and may no longer be fully offset by the sovereign’s unique credit strengths.”

Given higher interest rates and without effective measures to reduce government spending or increase revenues, the agency said it expects fiscal deficits will remain very large and debt affordability would be significantly weakened.

The rise in Treasury bond yields has increased pre-existing pressure on debt affordability, Moody’s said. It expects interest payments relative to revenue will rise to around 26% in 2033 from 9.7% in 2022. Additionally, Moody’s said it sees interest payments relative to GDP will rise to around 4.5% in 2033, from 1.9% in 2022.

Moody’s said its affirmation of the U.S.’s Aaa ratings its view that the nation’s “formidable credit strengths continue to preserve the sovereign’s rating, in particular exceptional economic strength, high institutional and governance strength, and the unique and central roles of the U.S. dollar and Treasury bond market in the global financial system.”

Earlier this year, Fitch ratings downgraded the U.S. to AA+, while S&P dropped its ratings on the U.S. to AA+ in 2011.