Moody's Downgrade of US Debt

Here is the full Press Release from Moody’s:

Moody's Ratings downgrades United States ratings to Aa1 from Aaa; changes outlook to stable

New York, May 16, 2025 -- Moody's Ratings (Moody's) has downgraded the Government of United States of America's (US) long-term issuer and senior unsecured ratings to Aa1 from Aaa and changed the outlook to stable from negative.

This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.

Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher. The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.

The stable outlook reflects balanced risks at Aa1. The US retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency. In addition, while recent months have been characterized by a degree of policy uncertainty, we expect that the US will continue its long history of very effective monetary policy led by an independent Federal Reserve. The stable outlook also takes into account institutional features, including the constitutional separation of powers among the three branches of government that contributes to policy effectiveness over time and is relatively insensitive to events over a short period. While these institutional arrangements can be tested at times, we expect them to remain strong and resilient.

The US' long-term local- and foreign-currency country ceilings remain at Aaa. The Aaa local-currency ceiling reflects a small government footprint in the economy and extremely low risk of currency and balance of payment crises. The foreign-currency ceiling at Aaa reflects the country's strong policy effectiveness and an open capital account, reducing transfer and convertibility risks.

Well we believe in the big scheme of things, the rating agencies worthiness is pretty much zero after the GFC. We know its a bit more symbolic now and its honestly nothing new for the United States debt profile. Honestly is anyone surprised?

The United States is the reserve currency of the world and the wealth of the U.S. is greater than the next 4 countries combined! Just let that sink in. Furthermore the United States has the Federal Reserve, the private entity in charge of printing its currency and if it wanted to, could print any amount the US Treasury needs.

Yes there are limitations, most notably accelerated inflation and diminished integrity of our system, but what is more concerning is that the U.S. will no longer be perceived as the “risk free” standard.

However, and for all intents and purposes, does it really matter?

the rate by which our government borrows money given its massive debt pile is still the best borrowing rate out there. We also want to point out that Bitcoin and a lot of the other digital currencies continue to eat into the inflationary mechanisms of global fiat currencies, and this will be a continued and ongoing problem for global central bank fiat money printers.

We have been living in a world for quite some time where the U.S. debt doesn’t really function as the risk free rate that so many have come to know. Yes it still borrows at the lowest rate possible, but both Microsoft and J&J hold AAA ratings also. Even Apple has a AA+ rating and just recently issued $4.5Bn in notes with their 10Y tranche coming with a 4.75% coupon so about 50bp above the US 10Y yields. So spreads are tight but the U.S. despite its debt pile continues to still borrow money very cheaply all things considered.

How is the US bond market taking this tonight, well quite in stride as the yields across the board are up slightly as the US 10Y is now trading 4.505%:

With that said, the US equity markets are sustaining some early losses as well in Asian trade, but NY will most likely try to fill this gap in the AM if it is even still a gap at that time. The Nasdaq futures are currently -107.75 points:

The SP500 futures are -14.25 ticks:

We also wanted to share the QQQ chart, we suspect the 530 area will offer decent resistance this week, with first real support on the week down at 497:

As far as Bitcoin (BTC) and Monero (XMR), these are the two Digital Assets that Magnelibra focuses upon, Bitcoin is the Gold standard reserve, and Monero is the standalone privacy coin, scalable for everyday transactions. We will continue to focus on these two as the dominant players in the future. We know the main stream focuses upon others like Ethereum, Solana, XRP, but we do not believe they offer what Bitcoin and Monero do.

Alright guys, we have all the MTR Subscriber data and trading trackers up next, we urge you to become a full subscriber and truly break through that barrier of understanding in regards to our global financial system.

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