Last Domino Falls for the United States’ AAA-Rating
May 19, 2025
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Late Friday afternoon, Moody’s became the last of the so-called ‘big-three’ credit rating agencies to cut the rating for the United States (U.S.) below the AAA level.1 S&P first cut the U.S. credit rating in 2011, followed by Fitch in 2023.2 Moody’s cited the U.S. government’s failure “to reverse the trend of large annual fiscal deficits and growing interest costs” in its rating action statement.3
The timing was unfavorable for the Trump administration’s attempt to pass a new tax bill. A vote in the House of Representatives on passage of the bill is possible later this week. The Moody’s rating action statement also included a warning that the current fiscal policies under consideration are unlikely to prevent further deterioration of the U.S. government’s fiscal performance.4
Bonds and stocks are under pressure to start the week following the Moody’s downgrade. Long Treasury yields are moving above the psychologically important 5% level for the first time since late 2023,5 while the S&P 500 Index is set to open nearly 1% lower.6
This week’s economic calendar includes new data on the state of the housing market, where existing and new home sales continue to struggle due to high mortgage rates and limited supply.7
Sources:
1,2,5Barron’s - Bond Selloff Sparked by Debt Downgrade as 30-Year Treasury Yield Surges Past 5%; 5/19/2025
3,4Moody’s Ratings – Rating Action; 5/16/2025
6Reuters – Wall St drops, Treasury yields rise after Moody's downgrade; 5/19/2025
7MarketWatch – U.S. Economic Calendar; as of 5/19/25
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