U.S. debt is increasingly at the mercy of the market as interest costs surge while elections add more risk to the debt ceiling, ratings agency warns
Source: Fortune ·
"This trajectory points to an unsustainable medium-term fiscal path and leaves the sovereign increasingly exposed to shifts in market sentiment and financing conditions."
From the source
The recent jump in Treasury yields has highlighted how vulnerable the U.S. debt outlook is to the bond market, which Scope Ratings flagged in a new report. On Friday, the Europe-based credit ratings agency maintained the U.S. sovereign score at AA-, three notches below the top rating and two steps below AA+ grades from rivals Moody’s, Fitch and S&P Global Ratings. Scope listed what the U.S. still has in its favor: a strong economy, the dollar as the world’s reserve currency, strong institutions like the Federal Reserve, as well as the deepest and most liquid capital markets. But while Scope kept the U.S. credit outlook at stable, it sees deficits worsening due to the persistence of “structural expenditure pressures” and limited political will for fiscal reform. At the same time, debt-servicing costs will drive further fiscal deterioration as U.S. primary deficits, or deficits excluding interest payments, will actually remain stable at around 3.5% of GDP, according to Scope. With the…