Latest news with #creditdowngrade
Washington Post
24-05-2025
- Business
- Washington Post
Prince George's County credit is downgraded amid federal spending cuts
The bond rating agency Moody's downgraded Prince George's County's credit this week, citing the Maryland county's sensitivity to federal spending cuts and its long-standing budget problems amid rising debt and interest rates in the country. The county's lower rating, from triple-A to Aa1, comes on the heels of Maryland's state government receiving its own credit downgrade last week after maintaining a triple-A bond rating for more than 52 years. The agency also lowered the District's bond rating to Aa1 and revised its outlook to negative in April, similarly citing Trump administration spending cuts as well as weaknesses in the commercial real estate market.
Forbes
23-05-2025
- Business
- Forbes
In The Credit Downgrade The U.S. Lost Its Aaa. What Now?
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, US, on Monday, May 19, ... More 2025. A renewed wave of dip buying fueled a rebound in stocks from session lows, with traders trying to look past the US downgrade by Moody's Ratings that has sent bond yields climbing and weakened the US dollar. Photographer: Michael Nagle/Bloomberg S&P led the U.S. bond credit downgrades in 2011. When Fitch downgraded U.S. bonds to AA+ in 2023, I wrote that the real news was, Moody's ratings were still Aaa. Finally last week, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1 citing years-long fiscal weakening and a materially higher interest burden than other Aaa sovereigns carry. These rating actions do not change the paramount position of the dollar in international trade: the U.S. country ceiling remains Aaa/AAA by all three SEC-regulated rating agencies. The U.S. still remains the world's largest economy. But lower ratings could have an impact on what the U.S. government pays for its debt. Moody's also revised its U.S. sovereign credit outlook from negative to stable, based on two structural positives: the Fed ('a very effective monetary policy led by an independent Federal Reserve') and the Constitution ('constitutional separation of powers among the three branches of government"). In the Financial Times, I said the credit downgrade was 'a long time in coming,' and that the reliance of the new rating on structural arguments made it 'a dire warning.' But the market, not Moody's, has the final say on pricing. The direction of prices on U.S. Treasuries going forward remains uncertain, but here are some key perspectives: If you believe the past is the best guide to the future, Moody's bond default studies tell us, on idealized basis, the default rates of 10-year Aaa corporates are 1/100th of one percent (one basis point) and 10 times lower than idealized default rates for 10-year Aa1 bonds (10 basis points). To understand how small this probability is, the likelihood of dying by a bolt of lightening is 1000 and 100 times higher, respectively. But Moody's Moody's Sovereign Issuers – 10-Year Transition and Default Rates report, which shows real historical trends in government credit downgrades and upgrades, provides a different view. From year-ends 2013 to 2023, Moody's reported four small or medium-sized Aa1-rated sovereigns of 125 in total. None remained Aa1 or were upgraded to Aaa. One dropped a notch, to Aa2, the other three notches, to Aa3. In short, Aa1 rated sovereigns are subject to credit downgrade risk. Nevertheless, considering that the U.S. is the world's largest economy with the world's highest national debt, this may be an apples-to-watermelons comparison. The analysis of Financial Times's Toby Nangle paints a more contradictory picture. Using the Congressional Budget Office's Budget and Economic Outlook: 2025 to 2035 and Moody's projections, he reverse-engineered four key ratios under the category of Fiscal Strength, a variable in Moody's ratings scorecard. Given General Government Debt (GGD) as a measure of debt burden and General Government Interest Payments (GGI) as a measure of debt affordability. Nangle found that GGD-to-GDP, associated with a B3 rating, will slip two notches, to Caa2, while GGD-to-Revenue, at Caa3, will slip a notch and hit the bottom of Moody's scale, at Ca. GGI-to-Interest Payments, B2, will slip to B3 or below. GGI-to-GDP, Ba1, will drop three notches to B1 or below. Caveat that these are not official results. They are third-party experimental results applied to inputs, not ratings. But after feeding these input levels back into the Moody's 10-year sovereign downgrade and default study highlighted above, further credit downgrades appear much more likely than upgrades. And default rates associated with these sovereign credit rating levels have historically been 30% or higher. A recent publication by Canadian private lender First National Financial LP says over USD 9 Trillion in U.S. Treasuries will mature this year, with 55-60% coming due before July. That is less than 45 days from now. With CBO projections of USD 1.9 Trillion due in 2025, the total liability will exceed USD 10 Trillion. The U.S. will need to roll it over in full or pay down part of the balance. Does the market have the capacity to absorb so much U.S. debt all at once? Who will buy it? Foreign investors already own 30% of U.S. Treasuries: will they come back for more? The U.S. 10-Year Treasury has pierced the 5% level and remains elevated. Yields on overseas governments with large economies are rising too. How much do yields need to rise for the debt to be rolled over in full? How much would deterioration in debt affordability further impact credit downgrade risk? For decades, US bonds represented the baseline cost of capital, like a generic: not no-frills, but no-risk. The risk-free rate being a necessary component of basic financial theory, its proxy has been USD yield or swap curves for 50 years. To form bond prices, investors often start with U.S. rates as the risk-free term, then add terms to reflect inflation, credit risk and liquidity factors. On this basis, some investors may still see the U.S. as essentially Aaa and be attracted to the yield pickup. But others are likely to want to observe how high rates rise before investing. If rates rise too high, too fast, the rise in burden and fall in affordability may cause the market to pull back, exacerbating credit downgrade risk. One way for the U.S. to address its debt problem would be to begin to pay down its liabilities. But yesterday, the House broke impasse on the tax and immigration overhaul package, sending it on the Senate. The 'Big Beautiful Bill' would cut Federal tax revenues by as much as USD 4.1 Trillion over the next decade. Supporters have also projected that the tax cuts will stimulate economic growth, paring the loss of tax dollars to USD 3.3 Trillion. In some scenarios, the interplay of changing immigration and automation patterns on labor and energy markets in the next ten years as a result of this legislation could turn out to be economic positives. Ratings could stabilize avoiding further credit downgrade risk. But that is still USD 3.3 Trillion less in tax collections available for debt repayment, which represents one-third of the total amount of liabilities coming due in 2025. The current level of uncertainty is part and parcel of stock market investing, but it is the antithesis of what credit investors seek.
Bloomberg
23-05-2025
- Business
- Bloomberg
Philippines May Cut US Treasury Holdings After Moody's Move
The Philippine central bank may consider reducing its holdings of US Treasuries after Moody's Ratings downgraded the US' credit score, according to Governor Eli Remolona. 'We're looking at it,' Remolona said when asked at a briefing on Friday if there's a chance the Philippines will start cutting its US treasuries as part of its reserves. 'It's one thing when other countries' debt is downgraded, but the US Treasuries, now that's a big thing.'
Globe and Mail
21-05-2025
- Business
- Globe and Mail
Moody's Credit Downgrade Just Triggered Another Gold Rally – Here's What's Next
Earlier this week, Moody's shocked the markets with a US credit downgrade, citing the national budget deficit. With that downgrade, the dollar slipped, and triggerd the flight to safety in gold. That's why gold rallied back to $3,288. That's also why gold stocks are gaining momentum, including Formation Metals Inc. (CSE: FOMO) (OTCPK: FOMTF), Freeport-McMoRan (NYSE: FCX), Centerra Gold (NYSE: CGAU) (TSX: GG), Barrick Gold (NYSE: GOLD) (TSX: ABX) and Newmont Corp. (NYSE: NEM) (TSX: NGT). 'There's still a level of uncertainty out in the market. Most notably, the Moody's downgrade, weakening dollar have supported teh precious metals complex overall,' said David Meger, director of metals trading at High Ridge Futures, as quoted by Helping, Goldman Sachs says gold could rally to $3,700 this year, and to $4,000 by 2026. UBS analysts say gold could rally to $3,500 by December. All thanks to stronger-than-expected central bank demand for gold, which isn't expected to slow any time soon. In fact, central banks are only accelerating demand. China, for example, just expanded its gold reserves for the sixth consecutive month, adding 70,000 troy ounces in April. Look at Formation Metals Inc. (CSE: FOMO) (OTCPK: FOMTF), For Example Formation Metals Inc. (CSE: FOMO) (OTCPK: FOMTF), a North American mineral acquisition and exploration company, is pleased to announce plans for executing a 20,000 metre multi-phase drill program at its flagship N2 Gold Project in Quebec, an advanced gold project with a global historic resource of ~870,000 ounces: 18 Mt grading 1.4 g/t Au (~809,000 oz Au) across four zones (A, East, RJ-East, and Central) and 243 Kt grading 7.82 g/t Au (~61,000 oz Au) across the RJ zone. The first 5,000 metres of the drill program is fully funded and is intended to commence this summer. The drill program is designed to focus on discovery drilling at new high-potential targets along the mineralization strikes at the "A", "RJ" and "Central" zones in the northern part of the property in order to discover new auriferous trends and unlock new zones of gold mineralization. The program will also focus on high-priority infilling and expansion targets in these zones to significantly enhance the project resource base through the recent exploration permit. Historical highlights from the top two priority zones include: - A Zone: With a historical resource of ~522,900 gold ounces (10.7 Mt @ 1.52 g/t Au), the "A" Zone is a shallow, highly continuous, low-variability historic gold deposit with ~15,000 metres of drilling across 55 drillholes, 84% of which intercepted gold mineralization. The best historical intercept includes up to 1.7 g/t over 35 metres with a metal factor of 93. ~1.65 km of strike has been drilled, with 3.1+ km of strike to be tested as part of the 20,000 metre program. - RJ Zone: With a historical resource of ~61,100 gold ounces (243 Kt @ 7.82 g/t Au), the "RJ" Zone is a high-grade target that was expanded upon in the last drill program in 2008 by Agnico-Eagle when gold was approximately ~$800/oz. Historically, 20,875 metres has been drilled over 82 drillholes, with best intercepts of 48 g/t over 0.5 metres and 16.5 g/t over 3.6 metres. ~900 metres of strike has been drilled, with 4.75+ km of strike to be tested as part of the 20,000 metre program. The Company has formally submitted its Application for Autorisation de Travaux d'exploration à Impacts (ATI) to the Ministère des Ressources naturelles et des Forets (MERN) following discussions with all necessary parties and anticipates receiving its ATI permit within the next 30 to 40 days, after which it intends on commencing its maiden drill program at N2. Deepak Varshney, CEO of Formation Metals, commented: "We are thrilled to unveil our drill plans for the N2 Project. Given the scale of the property, the compelling geological data, and the Abitibi Greenstone Belt's established history as a hotbed for gold mining, we believe that a program of this scale will deliver our goal of growing N2's historical resource into a near-surface multi-million-ounce deposit." Mr. Varshney continued: "We see the potential for over three million ounces of gold at N2, and our fully funded maiden 5,000-metre drilling program will mark the beginning of Formation's pursuit of that goal. Our maiden program will focus on building on the successes of our predecessors. The drilling discoveries made by Agnico-Eagle and Cypress after the initial historic resource estimate show the expansion potential at N2. With gold at $3,200, over 4 times the price in 2008 when Agnico last drilled the project, we believe that the timing is perfect for N2 and look forward to a very busy upcoming quarter." Other related developments from around the markets include: Freeport-McMoRan just reported first quarter 2025 results. Net incomeattributable to common stock in first-quarter 2025 totaled $352 million, $0.24 per share, and adjusted net income attributable to common stock totaled $358 million, $0.24 per share. Consolidated productiontotaled 868 million pounds of copper, 287 thousand ounces of gold and 23 million pounds of molybdenum in first-quarter 2025. Operating cash flowstotaled $1.1 billion, net of $0.3 billion of working capital and other uses, in first-quarter 2025. Operating cash flows are expected to approximate $7.0 billion, including $0.2 billion of working capital and other sources, for the year 2025, based on achievement of current sales volume and cost estimates, and assuming prices of $4.15 per pound for copper, $3,000 per ounce for gold and $20.00 per pound for molybdenum for the remainder of 2025. Centerra Gold reported its fourth quarter 2024 operating and financial results, and issued 2025 guidance. President and CEO, Paul Tomory, commented, 'In the fourth quarter, we had steady gold and copper production and ended 2024 near the low end of our production guidance range. At Öksüt, we benefited from elevated production in 2024 by processing inventory that was accumulated during the shutdown in 2022 and 2023 to achieve over 200,000 ounces. Since the restart of operations in June 2023, Öksüt generated close to $550 million in cash provided from operations and over $480 million in free cash flow NG. We generated strong free cash flow at both operations in the fourth quarter, driven by robust contributions from Mount Milligan, which increased our cash and cash equivalents to $625 million.' 'Looking ahead to 2025, our production guidance reflects Öksüt returning to normal production levels, as previously planned, after two years of processing excess inventory, which in turn has impacted unit costs. We remain disciplined to protect margins through initiatives at our sites including at Mount Milligan through the site optimization program which will continue in 2025. We forecast continued strong free cash flow generation at our operations in 2025, allowing us to fund the restart of Thompson Creek and continue to return capital to shareholders, while preserving our cash for strategic opportunities.' Barrick Gold announced that it has reached an agreement to sell the 50 percent interest in the Donlin Gold Project in Alaska held by Barrick's subsidiary Barrick Gold U.S. Inc. to affiliates of Paulson Advisers LLC and NOVAGOLD Resources Inc. (NYSE American, TSX:NG) for $1 billion in cash. In addition, Barrick has granted NOVAGOLD an option to purchase the outstanding debt owed to Barrick in connection with the Donlin Gold Project for $90 million if purchased prior to closing, or for $100 million if purchased within 18 months from closing, when the option expires. If that option is not exercised, the debt will remain outstanding, substantially in accordance with its existing terms. Paulson and NOVAGOLD have agreed to acquire 80 percent and 20 percent, respectively, of Barrick's subsidiary's interest in Donlin Gold LLC, the entity that holds the Donlin Gold Project, with each purchaser contributing pro rata to the purchase price and several existing shareholders, including Paulson, backstopping NOVAGOLD's purchase commitment. Newmont Corp. announced first quarter 2025 results and declared a dividend of $0.25 per share. 'Following on from a robust fourth quarter performance, Newmont has delivered 1.5 million attributable gold ounces and generated a record first quarter free cash flow of $1.2 billion, demonstrating the strength of our unrivaled Tier 1 Portfolio,' said Tom Palmer, Newmont's President and Chief Executive Officer. "We also successfully completed our non-core divestiture program, generating up to $4.3 billion in total gross proceeds including over $2.5 billion of after-tax cash proceeds in the first half of 2025. With these significant achievements and a solid start to the year, we remain firmly on track to meet our 2025 guidance, continuing on our journey towards creating the world's leading gold and copper portfolio for the benefit of our shareholders." Legal Disclaimer / Except for the historical information presented herein, matters discussed in this article contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Winning Media is not registered with any financial or securities regulatory authority and does not provide nor claims to provide investment advice or recommendations to readers of this release. For making specific investment decisions, readers should seek their own advice. Winning Media is only compensated for its services in the form of cash-based compensation. Pursuant to an agreement Winning Media has been paid three thousand five hundred dollars for advertising and marketing services for Formation Metals Inc. by Formation Metals Inc. We own ZERO shares of Formation Metals Inc. Please click here for full disclaimer. Contact Information:
Yahoo
21-05-2025
- Business
- Yahoo
Bond market jitters rise on 'narrative shift' from positive tariff news to mounting US debt crisis
Bond market jitters are back — and this time, it's not just about inflation. Long-term Treasury yields surged to kick off the week as Moody's US credit downgrade reignited market concerns over the country's worsening fiscal trajectory. On Monday, the 30-year Treasury yield (^TYX) briefly broke above the closely watched 5% threshold, the highest level since 2023, before retreating to around 4.94% as the bond market ultimately shrugged off the downgrade. But long-term yields ticked up again on Tuesday, hovering near 4.97%. Since bond prices move inversely to yields, rising yields indicate investors are selling bonds. This behavior runs counter to the typical flight-to-safety response during market turmoil and has fueled worries of a broader "sell America" trade. Wall Street analysts say the volatility reflects a shift in investor sentiment as recent optimism around trade developments gives way to renewed concern over the nation's ballooning debt. And while markets initially shrugged off the credit downgrade, analysts caution the bond market isn't out of the woods, pointing to rising fiscal uncertainty and stubborn inflation as key factors likely to keep long-term yields volatile in the short run. Read more: How to protect your savings against inflation Citi analysts said Monday that the US "fiscal space" is narrowing due to reduced tariff revenues, meaning the government has less leeway to increase spending without worsening its debt outlook. At the same time, the potential for major fiscal expenditure is growing under President Trump's proposed "big, beautiful" tax bill. "We have expected a narrative shift could take place from positive tariff news to negative budget/fiscal issues, which can see another round of 'sell the US': higher back-end yields [or long-term interest rates], lower risk assets, and lower US dollar," Citi analyst Daniel Tobon wrote in a note to clients on Monday. He warned that a sustained move above the 5% level on the 30-year Treasury yield could trigger a broader repricing of fiscal risk, with ripple effects for the dollar and global risk assets. Read more: What are bonds, and how do you invest in them? Trump's tax proposal, still in its early stages in Congress, calls for sweeping cuts to individual and corporate tax rates, which would raise the nation's debt ceiling by $4 trillion. Republican leaders are aiming for a vote in the House of Representatives before Memorial Day. "The clearest way in which these [deficit and budget reconciliation] uncertainties have manifested themselves is through a steeper US Treasury yield curve," Kelsey Berro, fixed income portfolio manager at JPMorgan Asset Management, told Yahoo Finance on Monday. Historically, a steeper yield curve, which occurs when long-term interest rates rise faster than short-term ones, signals expectations of stronger growth or higher inflation. But as Berro noted, concerns over rising US debt and long-term borrowing costs are driving the steepening this time around. While short-term yields like the 2-year and the 5-year have remained relatively stable, reflecting expectations that the Fed will hold interest rates steady, longer-term yields like the 10-year and 30-year have climbed more sharply as investors demand greater compensation for mounting fiscal and policy uncertainties. This additional compensation investors demand amid such unknowns is known as the term premium. Its recent rise signals growing concern over the US's role in the global economy and the future direction of both fiscal and monetary policy. "Ongoing tariff uncertainty means elevated risk of a recession in the US," BNP Paribas' James Egelhof and Guneet Dhingra wrote. "If a recession occurred, we think that concerns about debt sustainability would mean a less robust countercyclical fiscal response than observed in prior business cycles. This would mean a longer and deeper recession, with a larger monetary policy response." The possibility of a US recession, Moody's credit downgrade, and other weakening market signals have prompted some global investors to look elsewhere for more attractive returns. "There's a little bit more of a nail in the coffin in the sense that investors are looking at other options, and particularly international investors are looking at other options," Ellen Hazen, chief market strategist and portfolio manager at Investment Management, told Yahoo Finance on Monday. "So you may see flows out of the US because of these structural reasons." Kathy Jones, head of fixed income at Charles Schwab, echoed this sentiment, emphasizing that while there's no real substitute globally for US Treasurys, current policies are making it harder to attract foreign buyers. "By attempting to reduce our trade deficit in goods and services ... we're effectively limiting capital inflows and shrinking our capital account," she explained, arguing that this conflicts with the urgent need to finance the upcoming spending bill and other activities. Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
