Moody&rsquo;s Ratings stripped the United States of its last top-tier credit rating on Friday, downgrading its long-term issuer rating from Aaa to Aa1. The move reflects mounting concern about America&rsquo;s ballooning debt and structural fiscal deficits, which the agency warned are on an unsustainable trajectory.
The downgrade places Moody&rsquo;s in line with its two major counterparts&mdash;S&amp;P and Fitch Ratings&mdash;which previously downgraded the US sovereign rating in 2011 and 2023, respectively. With the move, all three top credit rating agencies now assess US government debt below the highest grade.
Although Moody&rsquo;s affirmed that the US retains significant credit strengths&mdash;including its resilient economy, deep capital markets, and the global dominance of the US dollar&mdash;it said these no longer fully offset the weakening of America&rsquo;s fiscal health. The agency simultaneously changed the outlook on the rating to &ldquo;stable&rdquo;, suggesting no further immediate downgrade is expected.
In its statement, Moody&rsquo;s cited the failure of successive US administrations and Congress to agree on meaningful fiscal reforms, describing the trend of persistent annual deficits as a key driver of the downgrade.
&ldquo;We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,&rdquo; the agency said.
The rating agency projects that the federal budget deficit will grow from 6.4 per cent of GDP in 2024 to nearly 9 per cent by 2035, driven by rising interest payments, increased entitlement spending, and relatively weak revenue generation.
Without reforms, the federal debt burden is expected to rise to 134 per cent of GDP by 2035&mdash;up from 98 per cent today&mdash;marking a sharp increase that would bring it close to post-World War II highs.
Moody&rsquo;s flagged the possibility that extending the 2017 Tax Cuts and Jobs Act, a central goal of the Republican-controlled Congress and President Donald Trump, would add about $4 trillion to the federal primary deficit (excluding interest payments) over the next decade. That alone, Moody&rsquo;s said, would materially worsen debt affordability and strain fiscal space further.
The agency noted that mandatory spending&mdash;including social security, medicare, and interest payments&mdash;is projected to account for nearly 78 per cent of total federal spending by 2035, up from 73 per cent today. Interest payments, in particular, are set to consume 30 per cent of all government revenue by 2035, compared to 18 per cent in 2024 and just 9 per cent in 2021.
<h2 dir="ltr">What will be the impact?</h2>
Though largely expected, the downgrade had an immediate, if modest, impact on financial markets. Yields on 10-year Treasury bonds rose to around 4.49 per cent in after-hours trading, while ETFs tracking longer-term treasury debt fell roughly 1 per cent. The broader equity market also responded, with the S&amp;P 500 ETF declining 0.4 per cent in post-market trading.
Market analysts said the downgrade could push up borrowing costs at the margin, as investors demand higher yields for holding US government debt. Others suggested the symbolic nature of the downgrade might have a limited effect due to the entrenched role of the US dollar and treasuries in global finance.
Still, the move highlights rising concerns about the sustainability of US debt and the political dysfunction that undermines efforts to address it. The announcement came shortly after the GOP-led House Budget Committee failed to advance a major tax-and-spending bill&mdash;one that aimed to extend the 2017 Trump tax cuts. The failure was due to opposition from hardline Republicans demanding steeper spending cuts.
Moody&rsquo;s downgrade also comes amid a wider debate over whether the US is losing its traditional fiscal discipline. Treasury Secretary Scott Bessent recently warned Congress that the country&rsquo;s debt trajectory was &ldquo;unsustainable,&rdquo; adding that a crisis could involve &ldquo;a sudden stop in the economy as credit would disappear.&rdquo;
<h2 dir="ltr">Concerns persist</h2>
Moody&rsquo;s emphasised that US institutions, including the Federal Reserve and the constitutional separation of powers, remain strong and are key stabilising factors. However, the agency noted that recent political dysfunction has hampered the policymaking process and created uncertainty over the government&rsquo;s ability to enact long-term fiscal reforms.
&ldquo;Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,&rdquo; Moody&rsquo;s wrote. It warned that without bipartisan action on spending and revenue, the situation would continue to deteriorate.
Analysts also warned that continued reliance on foreign capital to fund US debt&mdash;combined with declining demand for treasuries and heightened geopolitical tensions&mdash;could eventually erode investor confidence.
Although Moody&rsquo;s still sees the US dollar as the dominant reserve currency for the foreseeable future, any shock that triggers a rapid investor pullback could deepen fiscal risks and accelerate the debt crisis.
<h2 dir="ltr">Looking ahead</h2>
Moody&rsquo;s stated that the US still has time and institutional capacity to reverse its fiscal trajectory, particularly if bipartisan reforms can be enacted to increase revenue or curb spending growth. A credible long-term fiscal plan could eventually lead to an upgrade in the rating, the agency said.
On the other hand, a faster-than-expected deterioration in debt metrics&mdash;or a significant erosion in policy credibility and investor confidence&mdash;could prompt further rating actions in the future. While the current rating outlook is stable, Moody&rsquo;s made clear that risks remain tilted toward fiscal deterioration unless political leaders make difficult decisions soon.
In the absence of such action, the downgrade stands as a stark warning: the world&rsquo;s largest economy can no longer count on its historical fiscal reputation alone to preserve its top credit standing.

Business & Economy: Moody's projects the budget deficit will grow to nearly 9 per cent by 2035, driven by interest payments, entitlement spending, weak revenue generation

Moody’s Ratings stripped the United States of its last top-tier credit rating on Friday, downgrading its long-term issuer rating from Aaa to Aa1. The move reflects mounting concern about America’s ballooning debt and structural fiscal deficits, which the agency warned are on an unsustainable trajectory. The downgrade places Moody’s in line with its two major counterparts—S&P and Fitch Ratings—which previously downgraded the US sovereign rating in 2011 and 2023, respectively. With the move, all three top credit rating agencies now assess US government debt below the highest grade. Although Moody’s affirmed that the US retains significant credit strengths—including its resilient economy, deep capital markets, and the global dominance of the US dollar—it said these no longer fully offset the weakening of America’s fiscal health. The agency simultaneously changed the outlook on the rating to “stable”, suggesting no further immediate downgrade is expected. In its statement, Moody’s cited the failure of successive US administrations and Congress to agree on meaningful fiscal reforms, describing the trend of persistent annual deficits as a key driver of the downgrade. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” the agency said. The rating agency projects that the federal budget deficit will grow from 6.4 per cent of GDP in 2024 to nearly 9 per cent by 2035, driven by rising interest payments, increased entitlement spending, and relatively weak revenue generation. Without reforms, the federal debt burden is expected to rise to 134 per cent of GDP by 2035—up from 98 per cent today—marking a sharp increase that would bring it close to post-World War II highs. Moody’s flagged the possibility that extending the 2017 Tax Cuts and Jobs Act, a central goal of the Republican-controlled Congress and President Donald Trump, would add about $4 trillion to the federal primary deficit (excluding interest payments) over the next decade. That alone, Moody’s said, would materially worsen debt affordability and strain fiscal space further. The agency noted that mandatory spending—including social security, medicare, and interest payments—is projected to account for nearly 78 per cent of total federal spending by 2035, up from 73 per cent today. Interest payments, in particular, are set to consume 30 per cent of all government revenue by 2035, compared to 18 per cent in 2024 and just 9 per cent in 2021. What will be the impact? Though largely expected, the downgrade had an immediate, if modest, impact on financial markets. Yields on 10-year Treasury bonds rose to around 4.49 per cent in after-hours trading, while ETFs tracking longer-term treasury debt fell roughly 1 per cent. The broader equity market also responded, with the S&P 500 ETF declining 0.4 per cent in post-market trading. Market analysts said the downgrade could push up borrowing costs at the margin, as investors demand higher yields for holding US government debt. Others suggested the symbolic nature of the downgrade might have a limited effect due to the entrenched role of the US dollar and treasuries in global finance. Still, the move highlights rising concerns about the sustainability of US debt and the political dysfunction that undermines efforts to address it. The announcement came shortly after the GOP-led House Budget Committee failed to advance a major tax-and-spending bill—one that aimed to extend the 2017 Trump tax cuts. The failure was due to opposition from hardline Republicans demanding steeper spending cuts. Moody’s downgrade also comes amid a wider debate over whether the US is losing its traditional fiscal discipline. Treasury Secretary Scott Bessent recently warned Congress that the country’s debt trajectory was “unsustainable,” adding that a crisis could involve “a sudden stop in the economy as credit would disappear.” Concerns persist Moody’s emphasised that US institutions, including the Federal Reserve and the constitutional separation of powers, remain strong and are key stabilising factors. However, the agency noted that recent political dysfunction has hampered the policymaking process and created uncertainty over the government’s ability to enact long-term fiscal reforms. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s wrote. It warned that without bipartisan action on spending and revenue, the situation would continue to deteriorate. Analysts also warned that continued reliance on foreign capital to fund US debt—combined with declining demand for treasuries and heightened geopolitical tensions—could eventually erode investor confidence. Although Moody’s still sees the US dollar as the dominant reserve currency for the foreseeable future, any shock that triggers a rapid investor pullback could deepen fiscal risks and accelerate the debt crisis. Looking ahead Moody’s stated that the US still has time and institutional capacity to reverse its fiscal trajectory, particularly if bipartisan reforms can be enacted to increase revenue or curb spending growth. A credible long-term fiscal plan could eventually lead to an upgrade in the rating, the agency said. On the other hand, a faster-than-expected deterioration in debt metrics—or a significant erosion in policy credibility and investor confidence—could prompt further rating actions in the future. While the current rating outlook is stable, Moody’s made clear that risks remain tilted toward fiscal deterioration unless political leaders make difficult decisions soon. In the absence of such action, the downgrade stands as a stark warning: the world’s largest economy can no longer count on its historical fiscal reputation alone to preserve its top credit standing.

Moody’s downgrades US credit rating over mounting debt, fiscal gridlock

International rating agency Fitch has downgraded Russia’s sovereign rating, warning a default is "imminent".

It has downgraded Russia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘B’. &nbsp;It means that Russia will soon be unable to pay its debts.

A low rating means the chances of not getting repaid is considered to be high - and so an investor will charge more to lend to that country.

The move comes amid increasing international sanctions against Russia in the wake of the invasion of Ukraine.

"This rating action follows our downgrade... on 2 March, and developments since then have, in our view, further undermined Russia's willingness to service government debt," the agency said.

"The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations," it added.

On Sunday, Moscow assured investors that it would continue to service its sovereign debt.

However, it warned that international sanctions imposed on its energy industry could limit its ability and willingness to meet its obligations.

Also read |&nbsp;<a href="https://www.wionews.com/world/european-union-adds-160-russian-oligarchs-senators-to-sanctions-blacklist-460584">European Union adds 160 Russian oligarchs, senators to sanctions blacklist</a>

"The actual possibility of making such payments to non-residents will depend on the limiting measures introduced by foreign states in relation to the Russian Federation," the finance ministry said in a statement.

In recent days, rival ratings agencies Moody's Investors Service and S&amp;P Global Ratings have also slashed their assessments of Russian sovereign debt.

Meanwhile, Russia’s ruble has hit a record low of more than 10 per cent since Friday, closing it at 137 against a dollar.

Also read |&nbsp;<a href="https://www.wionews.com/photos/how-ukraines-punisher-drone-is-targeting-russian-supply-lines-460230">How Ukraine's 'Punisher' drone is targeting Russian supply lines</a>

The reason behind this latest fall is reported to be the inability of traders to buy and sell the Russian currency, which has become more limited as fewer banks want to settle transactions against it in the offshore market.

As per a&nbsp;Reuters&nbsp;report,&nbsp;Russian markets are expected to remain closed for trading until at least Wednesday.

(With inputs from agencies)

International rating agency Fitch has downgraded Russia’s sovereign rating, warning a default is "imminent". It has downgraded Russia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘B’.

International rating agency Fitch has downgraded Russia’s sovereign rating, warning a default is "imminent". It has downgraded Russia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘B’. It means that Russia will soon be unable to pay its debts. A low rating means the chances of not getting repaid is considered to be high - and so an investor will charge more to lend to that country. The move comes amid increasing international sanctions against Russia in the wake of the invasion of Ukraine. "This rating action follows our downgrade... on 2 March, and developments since then have, in our view, further undermined Russia's willingness to service government debt," the agency said. "The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations," it added. On Sunday, Moscow assured investors that it would continue to service its sovereign debt. However, it warned that international sanctions imposed on its energy industry could limit its ability and willingness to meet its obligations. Also read | European Union adds 160 Russian oligarchs, senators to sanctions blacklist "The actual possibility of making such payments to non-residents will depend on the limiting measures introduced by foreign states in relation to the Russian Federation," the finance ministry said in a statement. In recent days, rival ratings agencies Moody's Investors Service and S&P Global Ratings have also slashed their assessments of Russian sovereign debt. Meanwhile, Russia’s ruble has hit a record low of more than 10 per cent since Friday, closing it at 137 against a dollar. Also read | How Ukraine's 'Punisher' drone is targeting Russian supply lines The reason behind this latest fall is reported to be the inability of traders to buy and sell the Russian currency, which has become more limited as fewer banks want to settle transactions against it in the offshore market. As per a Reuters report, Russian markets are expected to remain closed for trading until at least Wednesday. (With inputs from agencies)

Fitch downgrades Russia’s sovereign rating, says default ‘imminent’

Rating agency Moody's on Thursday slashed its outlook for German banks from "stable" to "negative", warning their profitability and creditworthiness would "decline" in the coming months.

"Banks' weak profitability will decline further as net interest income falls" amid low or negative interest rates set by the European Central Bank, Moody's vice-president Bernhard Held said in a statement.

While banks must for now set aside little cash to cover the risk of borrowers falling behind on payments, such charges are "unsustainably low", he judged.

Especially smaller banks that rely on customers' deposits for their funding are seeing profits sapped by low rates, which have prompted many bosses to blast the ECB for the policy.

Moody's noted that German banks "have had very limited success in improving their high cost-to-income ratios", spending around 80 euro cents for each euro of revenue in 2018.

Meanwhile, risk-averse depositors prefer to heap up cash in savings accounts rather than opt for riskier investments like stocks -- building deposits up to 40 percent of the sector's assets.

As banks cannot always find ways -- such as lending -- to put that cash to work in the real economy, they deposit large amounts with the ECB, which presently inflicts a negative interest rate of -0.5 per cent.

Banks have even been attempting to fend off new clients from opening accounts, passing on the negative rates to savers.

One Bavarian cooperative bank recently became the first to charge a negative rate from the first euro deposited in a savings account.

Rating agency Moody's on Thursday slashed its outlook for German banks from "stable" to "negative", warning their profitability and creditworthiness would "decline" in the coming months.

Rating agency Moody's on Thursday slashed its outlook for German banks from "stable" to "negative", warning their profitability and creditworthiness would "decline" in the coming months. "Banks' weak profitability will decline further as net interest income falls" amid low or negative interest rates set by the European Central Bank, Moody's vice-president Bernhard Held said in a statement. While banks must for now set aside little cash to cover the risk of borrowers falling behind on payments, such charges are "unsustainably low", he judged. Especially smaller banks that rely on customers' deposits for their funding are seeing profits sapped by low rates, which have prompted many bosses to blast the ECB for the policy. Moody's noted that German banks "have had very limited success in improving their high cost-to-income ratios", spending around 80 euro cents for each euro of revenue in 2018. Meanwhile, risk-averse depositors prefer to heap up cash in savings accounts rather than opt for riskier investments like stocks -- building deposits up to 40 percent of the sector's assets. As banks cannot always find ways -- such as lending -- to put that cash to work in the real economy, they deposit large amounts with the ECB, which presently inflicts a negative interest rate of -0.5 per cent. Banks have even been attempting to fend off new clients from opening accounts, passing on the negative rates to savers. One Bavarian cooperative bank recently became the first to charge a negative rate from the first euro deposited in a savings account.

Moody's sees 'negative' outlook for German banks

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Moody’s downgrades US credit rating over mounting debt, fiscal gridlock

Fitch downgrades Russia’s sovereign rating, says default ‘imminent’

Moody's sees 'negative' outlook for German banks