Breaking! Moody's announces downgrade of the US credit rating, the US has lost its last AAA endorsement!

Global markets today witnessed a bizarre scene of 'everything falling'. This is an indiscriminate decline, with both risk assets and safe-haven assets facing sell-offs—this situation often arises from a sudden contraction of liquidity.

The main reason: Moody's downgraded the US credit rating by one notch, citing that the growth rate of its debt and interest payments exceeds that of sovereign nations with comparable ratings.

Previously, Moody's was the last major agency to maintain the AAA rating for US sovereign debt.

This move marks the end of an era.

In 2023, due to the expansion of the fiscal deficit and increased interest payments, Moody's changed its outlook on the US sovereign rating.

Now, it has downgraded the rating from 'Aaa' to 'Aa1'.

Moody's stated, 'US governments and Congress have failed to reach consensus on measures to reverse the trend of enormous annual fiscal deficits and rising interest costs'.

Moody's estimates that by 2035, the federal debt burden will rise to about 134% of GDP, compared to 98% in 2024.

Previously, two other rating agencies also downgraded the US rating.

In August 2023, Fitch downgraded the US sovereign rating by one notch, citing fiscal deterioration and the repeated last-minute debt ceiling negotiations. These negotiations threaten the government's payment ability.

And S&P stripped the US of its top AAA rating after the debt ceiling crisis in 2011.