Moody’s(US:MCO) Mei Ri Jing Ji Xin Wen·2025-05-19 09:07Core Viewpoint - Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1 due to rising government debt and interest payments, marking the first time all three major rating agencies have downgraded the U.S. from its highest rating since 1994 [1][5][9] Group 1: Rating Downgrade Details - The U.S. federal government debt has reached $36.2 trillion, accounting for 124% of GDP, with projections indicating it could rise to 134% by 2035 [4][5] - The fiscal deficit for FY2024 is projected to be $2.1 trillion, exceeding 6.4% of GDP, and is expected to rise to 9% by 2035 under high-interest conditions [5][10] - Moody's cited the inability of current fiscal plans to significantly reduce mandatory spending and deficits as a reason for the downgrade [4][5] Group 2: Market Reactions - Following the downgrade announcement, U.S. stock futures, Treasury futures, and the dollar index all weakened, with the 30-year Treasury yield rising to 5.023%, the highest since November 2023 [2][15] - Historical context shows that previous downgrades have led to significant market volatility, with the Dow Jones experiencing a maximum single-day drop of 5.55% in 2011 [16][17] Group 3: Expert Opinions - Analysts express concerns that the downgrade reflects a long-standing issue of unsustainable debt levels and political dysfunction, which could lead to increased borrowing costs and reduced demand for U.S. debt [7][18] - Richard Francis from Fitch highlighted the uncertainty surrounding large-scale spending cuts and the persistent high deficit, which is projected to remain around 120% of GDP [7][14] - Experts warn that the downgrade could undermine the perception of U.S. Treasuries as a risk-free asset, potentially leading to a shift in investment strategies [17][18]