US Interest Costs Rise to Record High as Dollar Value Declines

The US economy is under increasing pressure as credit rating agency Moody's has expressed significant concerns about US finances. Due to a sharp expected rise in national debt and budget deficits, the agency has downgraded the US credit rating for the first time in history, from a perfect Aaa status to the second-highest Aa1 level. This has caused significant turmoil in financial markets.

The interest rate for 30-year US Treasury bonds has risen to 5.012%, the highest level since November 2023. This increase is a major setback for the US government, as it means higher interest costs to pay off the massive national debt. 'I wouldn’t overstate the importance of this downgrade, but it adds to the existing trend of de-dollarization,' said Jordan Rochester, head of macro strategy at Mizuho International, to Bloomberg.

The dollar itself is also under pressure, falling nearly 1% against the euro. Meanwhile, the price of gold has risen by about 2% to $3,244 per troy ounce as investors seek safer assets.

Moody's was the last major credit rating agency to maintain the US at its highest rating level. Other agencies had already taken steps to downgrade the US. 'This is a significant symbolic step because Moody's was the last of the major rating agencies to give the US the highest rating,' analysts at Deutsche Bank noted.