Bessent says US will ‘never default’ and will raise debt ceiling
Treasury Secretary Scott Bessent said they are unclear still of the looming X date, when the U.S. would breach the debt ceiling.
U.S. stock futures point to a lower open after Moody’s stripped the U.S. of its top credit rating.
Moodys cut its credit rating on Friday a notch to Aa1 from Aaa due to likely difficulty financng the federal government’s growing budget deficit and the ramifications of rolling over existing U.S. debts in a period of high borrowing costs.
At 6:10 a.m. ET, futures linked to the blue-chip Dow slipped -0.84%, while broad S&P 500 futures dropped -1.25% and tech-heavy Nasdaq futures fell -1.65%.
Moody’s was the last of the three major ratings agencies to downgrad the U.S. Fitch Ratings downgraded its U.S. credit rating to AA+ from AAA in 2023. Standard & Poor’s downgraded the nation’s credit rating in 2011.
“We will start by stating, undoubtedly, that U.S. Treasuries remain the most secure credit in the world,” said Mike O’Rourke, chief market strategist at JonesTrading. “Of course, we agree with most observers that the U.S. fiscal state is on an unsustainable course. It should concern everyone that U.S. federal debt outstanding is 125% of GDP, but one needs to keep the situation in perspective. Japan hit these levels two decades ago.”
Japan’s government debt outstanding now exceeds 200% of gross domestic product, and its 10-year yield is much lower than Treasuries, he noted.
Trade worries linger
Ongoing economic uncertainty will likely keep driving markets outside of the very immediate term effect from the Moody’s downgrade, O’Rourke said,
On Sunday, Treasury Secretary Scott Bessent said tarff rates could go back to the aggressive levels that were announced on April 2 if countries don’t negotiate in good faith with the U.S.
“Some countries were at 10%, some were substantially higher,” he said on Meet the Press. “And the negotiating leverage that President Trump is talking about here is: if you don’t want to negotiate, then it will spring back to the April 2nd level.”
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
