Moody's downgrades US government debt outlook to negative
A government shutdown remains a strong possibility for the US, Moody’s noted, as the deadline for funding to keep the government open is set to expire on 17 November.
«The key driver of the outlook change to negative is Moody's assessment that the downside risks to the US' fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strengths,» the agency said.
While Moody's said it expects the country to «retain its exceptional economic strength» and maintained its Aaa rating, it raised the prospect that this could be cut.
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The agency pointed to the «sharp rise» in US Treasury bond yields, which is increasing pressure on US debt affordability. It forecasted that federal interest payments relative to revenue and GDP will rise to about 26% and 4.5% by 2033, respectively, from 9.7% and 1.9% last year.
This will be further impacted by a projected rise in the US government's debt burden to about 120% of GDP by 2033, from 96% in 2022.
«In the absence of policy action, Moody's expects the US' debt affordability to decline further, steadily and significantly, to very weak levels compared to other highly-rated sovereigns,» it added.
A government shutdown also remains a strong possibility for the US, Moody's noted, as the deadline for funding to keep the government open is set to expire on 17 November.
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Previous attempts to reach a deal on keeping the government open have only delayed a shutdown by a matter of months, and new US House speaker Mike Johnson has struggled to control the Republican majority.
«In Moody's view, such political polarisation is
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