Moody’s Downgrade of U.S. Credit
Moody’s has lowered the U.S. government’s credit rating from AAA to Aa1, citing persistent fiscal deficits and rising interest costs. Join us as Jason talks through the implications on Treasury interest rates.
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This discussion is with Vector advisor and COO Jason Ranallo.
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Summary
A shift occurred in the world of government bonds—one that, if the trend continues, could have implications for interest rates, mortgage affordability, and the broader economy. In our latest podcast episode, Vector’s Jason Ranallo breaks down what rating agency Moody’s downgrade of U.S. Treasury debt means—and if it matters for your financial future.
Moody’s has lowered the U.S. government’s credit rating from AAA to Aa1, citing persistent fiscal deficits and rising interest costs. While this may sound concerning, we believe that Treasuries can have a place in a diversified portfolio, and the fundamentals of the U.S. economy are still strong.
We also look at Treasury yields–which have remained in fair-value range, mortgage rates, U.S. debt levels, and GDP.
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Key Takeaways
• Moody’s Downgrade: The U.S. lost its last AAA rating from Moody’s, following similar moves by S&P and Fitch.
• Historical Context: Moody’s AAA rating had stood since 1917, when the U.S. issued Liberty Bonds to fund World War I.
• Debt Trajectory: Federal debt could rise to 134% of GDP within a decade, analysts suggest, up from 40% two decades ago.
• Market Response: Despite the downgrade, 10-year Treasury yields remain steady around 4.45%.
• Impact on Mortgages: With rates near 6.9%, housing affordability is at a multi-decade low—especially for first-time buyers.
• Investment Strategy: Treasuries remain valuable for their liquidity and relative stability, even amid changing credit ratings.
At Vector, our team remains focused on helping you navigate changes in your financial life with clarity, not reaction. This downgrade is important, but it doesn’t change our confidence in your investment policy.
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Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.
Information expressed does not take into account your specific situation or objectives, and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation.
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