US borrowing costs jump after loss of top credit rating

Telegraph

19-05-2025

US borrowing costs jumped and the dollar weakened after America was stripped of its prized top credit rating.
The yield on 30-year treasuries, as US government bonds are known, rose above 5pc in early trading on Monday. Yields move inversely to price, meaning investors are selling US debt and demanding a higher interest rate to hold it.
Long-term borrowing costs for Washington are now at their highest level since late 2023 and compare to rates as low as 1.2pc in 2020.
The dollar also slipped on Monday morning, dropping to $0.75 against the pound.
It came after Moody's cut the US's top sovereign credit rating by one notch on Friday, becoming the last of the major ratings agencies to downgrade the country. It cited concerns about the growing $36 trillion federal debt pile.
Jim Reid, a strategist at Deutsche Bank, said: 'This is a major symbolic move as Moody's were the last of the major rating agencies to have the US at the top rating.'
Concerns about the US debt come as Donald Trump seeks to push through a package of new tax cuts that economists fear could worsen federal finances.
Analysts say the plan, which would extend the 2017 cuts from Mr Trump's first term, would add $3 trillion to $5 trillion to the nation's debt over the next decade.
Moody's cited the rising debt for its decision on Friday to downgrade the US credit rating. The debt pile is on track to reach 134pc of GDP by 2035, the agency said.
Mr Trump's sweeping tax cuts bill, which had been stalled for days by Republican infighting over spending cuts, won approval from a key congressional committee on Sunday to advance toward possible passage in the House of Representatives later this week.
The action was a big win for Mr Trump and Mike Johnson, the House Speaker, after hardline Republican conservatives blocked the bill on Friday over a dispute involving spending cuts to the Medicaid healthcare programme and the repeal of green energy tax credits.
Mr Johnson said the Moody's downgrade showed the need for the bill. He said. 'We're talking about historic spending cuts. I mean, this will help to change the trajectory for the US economy.'
Scott Bessent, the US Treasury, blamed Moody's downgrade on Joe Biden. He told NBC's Meet the Press on Sunday: 'We didn't get here in the past 100 days. It's the Biden administration and the spending that we have seen over the past four years that we inherited.'