Moody’s cuts U.S. credit rating to AA+ — should markets worry?
After markets closed on May 16, Moody’s became the third major agency to downgrade the U.S. long-term credit rating from AAA to AA+.
Traditional markets dipped ~1% in after-hours — a reflex rooted in 2011.
Back then, S&P’s first-ever downgrade triggered a panic selloff, with equities dropping up to 20% in the following months.
Why? Many contracts required AAA collateral — and Treasuries no longer qualified.
But things have changed.
Veteran analyst Jim Bianco explains:
In 2011, the fear was real — many derivatives, credit agreements, and mandates prohibited anything below AAA.
After that chaos, contracts were rewritten to refer simply to ‘U.S. government securities’ — not their rating.
When Fitch downgraded in 2023, markets barely flinched.
Moody’s move now makes the AA+ consensus unanimous — but it changes nothing mechanically.
No forced action, no shock to markets.
It’s symbolic — not structural.