A MAJOR RATING AGENCY GIVES U.S. DEBT A DOWNGRADE

Strike three landed for Uncle Sam's credit rating in May, as Moody's became the third major rating agency to downgrade U.S. debt.

- ANNE KATES SMITH

Moody's changed its rating from Aaa to Aal, one notch lower on a 21-notch scale. Standard & Poor's cut its U.S. debt rating in 2011; Fitch followed in 2023. Moody's said the move stems from a failure of successive U.S. administrations and Congress to reverse the long-term trend of large fiscal deficits and growing interest costs, and an outlook for more of the same over the next decade. “The U.S.'s fiscal performance is likely to deteriorate relative to its own past and compared to other highly rated sovereigns,” the agency said in a statement. Only 10 countries enjoy a triple-A rating, including Australia, Canada, Germany and Switzerland, according to investment firm Janus Henderson. Although Wall Street experts downplayed the possibility of a full-on fiscal crisis, yields on 10-year Treasuries rose in the wake of the cut. (Bond prices fall when yields rise, and vice versa.) At 4.4% at the end of May, yields remain within a trading range for 2025 that has seen them as high as 4.8% and as low as 4.0%. The news came as markets were grappling with warnings about tariff-induced price hikes for consumer goods and a federal budget bill working its way through Congress that could add trillions to the deficit over the next decade.