Moody's downgraded U.S. government debt from Aaa to Aa1, citing the rapid increase in federal debt and the necessity for potentially higher yields to refinance. While a 30-year bond offering a 5% yield appears safe amid a volatile stock market, investors face ongoing uncertainty as current deficit levels exceed $2 trillion annually. With warnings of a potential U.S. default on the horizon if Congress fails to agree on a debt ceiling, the landscape for U.S. debt security remains complex, making careful investment decisions imperative.
The primary reason for Moody's downgrade is the rapid rise in federal government debt and potentially higher yields to refinance it.
The latest downgrade, anticipated by many, comes as the US federal budget deficit is near $2 trillion a year, more than 6% of GDP.
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