Financial encyclopedia

In May 2025, the rating agency Moody's downgraded the long-term credit rating of the United States from the highest "Aaa" to "Aa1". This was the last of the three major rating agencies to downgrade the United States, marking that the global consensus on the "risk-free nature of US debt" is gradually cracking. 

What is credit rating? 

Credit rating is used to assess a country or enterprise's ability to repay debts. Every time it is downgraded by one level, it indicates an increase in risk and borrowing costs will also rise accordingly. 

The United States has long been regarded as the "most reliable borrower in the world", and its treasury bonds are even called "risk-free assets". Once the rating is downgraded, market confidence is bound to be undermined. 

Why was the rating downgraded? 

Fiscal deterioration: As of now, the total debt of the United States has exceeded 36 trillion US dollars. It is estimated that by 2035, nearly 0.3 yuan out of every 1 yuan of tax revenue will be used to pay interest. 

High political uncertainty: Congress has repeatedly failed to reach consensus on debt ceiling, spending cuts or tax increase plans, weakening the government's debt repayment capacity and increasing market unease. 

How was the market response? 

Rising bond yields: The yield on 30-year US Treasuries has surpassed 5%, indicating an increase in the government's borrowing costs. 

The weakening of the US dollar: Capital flows out of the dollar zone and into safe-haven assets such as gold. 

The loan pressure is intensifying: The mortgage interest rate in the US may remain above 7%, which could slow down the recovery of the housing market and the credit market. 

How should investors deploy? 

Review risk exposure: Check the proportion of dollars and US Treasuries in your portfolio to avoid over-concentration. 

Increase holdings of safe-haven assets, such as gold and emerging market government bonds, to diversify risks. 

Keep a close eye on interest rate trends: monitor yield rates and the Federal Reserve's policies, and adjust investment strategies accordingly. 

Even if the United States' credit rating is downgraded this time, it remains the world's most influential economy. However, it also reminds us: 

A "risk-free asset" has always existed only in confidence.