05/18/2025

Moody's Downgrade Intensifies Investor Worry about U.S. Fiscal Path

Investors are focusing on the U.S. tax package's impact on the budget deficit

A U.S. sovereign downgrade by Moody's has exacerbated investor worries about a looming debt time-bomb that could spur bond market vigilantes who want to see more fiscal restraint from Washington, D.C.

The ratings agency cut America's pristine sovereign credit rating by one notch on Friday, the last of the major ratings agencies to downgrade the country, citing concerns about the nation's growing $36 trillion debt pile.

The move came as Republicans who control the House of Representatives and the Senate seek to approve a sweeping package of tax cuts, spending hikes and safety-net reductions, which could add trillions to the U.S. debt pile. Uncertainty over the final shape of the so-called "Big Beautiful Bill" has investors on edge even as optimism has emerged over trade. The bill failed to clear a key hurdle on Friday even as U.S. President Donald Trump called for unity around the legislation.

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