Moody's officially downgraded the US long-term sovereign credit rating on Friday, May 16 (Eastern Time).
Caption: Is this the reason for the after-hours plunge? Anyway, even on weekends, I don't want to rest. No stock market? There's always the crypto world to check out. Feels like BTC is gearing up.
Conclusion
Moody’s Ratings officially downgraded the U.S. long-term sovereign credit rating from “Aaa” to “Aa1” on **Friday, May 16, 2025 (Eastern Time)**, and revised the outlook from "negative" to "stable". This news comes from Moody’s official rating action announcement and real-time reports by multiple mainstream financial media outlets, confirming its accuracy.
Key Information
| Item | Details |
|---|---|
| Downgrade Magnitude | Aaa → Aa1 (second-highest tier on the 21-level scale) |
| Outlook | Changed from "negative" to "stable" |
| Primary Reasons | 1. High federal debt-to-GDP ratio: Moody’s estimates it reached approximately 124% of GDP by end-2024; 2. Rapidly rising interest burden: Annual interest payments could approach $1 trillion within years; 3. Lack of bipartisan consensus: Long-term deficit reduction measures stalled, fiscal sustainability weaker than peers; 4. Increased policy uncertainty: Recent tax and spending proposals may further elevate debt trajectory. |
| Historical Significance | This marks Moody’s first-ever stripping of the U.S.’s Aaa status since initiating ratings in 1949; now all three major agencies (Moody’s, S&P, Fitch) have downgraded U.S. sovereign ratings below AAA. |
| Market Reaction (as of writing) | - 2-year Treasury yields rose ~6–8 bp intraday before retreating; - Dollar index saw minor fluctuations; - S&P 500 futures held steady, with institutions broadly expecting limited short-term funding cost impacts. |
Difference from the 2023 "Outlook Downgrade"
- 2023-11-10: Moody’s maintained Aaa but changed the outlook to negative;
- 2025-05-16: Officially downgraded to Aa1 and revised the outlook back to stable, implying no imminent further cuts but also low likelihood of restoring Aaa.
Comparison with Other Rating Agencies
| Agency | Current Rating | Latest Action | Key Reason |
|---|---|---|---|
| S&P | AA+ (downgraded in 2011) | Maintained | Political polarization, high debt |
| Fitch | AA+ (downgraded Aug 2023) | Maintained | Debt ceiling deadlock, fiscal trajectory |
| Moody’s | Aa1 (downgraded May 2025) | This move | Relative weakening in debt and interest burden |
Follow-up Observations
- June CBO (Congressional Budget Office) fiscal baseline update: Further agency actions may be triggered if deficits and interest ratios continue rising.
- FY2026 budget proposal: Whether it outlines a credible medium-term deficit reduction path.
- Bipartisan negotiations on tax/spending bills: Any new tax cuts or expansion plans could alter the duration of Moody’s "stable" outlook.
Quick Tip: While the downgrade has limited short-term liquidity impact on U.S. Treasuries, it highlights the structural risks of "high debt + high rates"; investors assessing dollar asset duration exposure should monitor repricing pressures from rising rates on bonds and equity valuations.
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