Tuesday, May 25, 2010
The government’s finances have been “substantially worsened by the credit crisis, recession, and government spending to address these shocks,”
By Mary Childs
May 25 (Bloomberg) -- The U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce projected record budget deficits, according to Moody’s Investors Service Inc.
The U.S. retains its top rating for now because of a “high degree of economic and institutional strength,” the New York- based ratings company said in a statement today that was little changed from a credit opinion released in February. The outlook is stable, the statement said.
The government’s finances have been “substantially worsened by the credit crisis, recession, and government spending to address these shocks,” Moody’s analysts lead by Steven A. Hess wrote. “The ratios of general government debt to GDP and to revenue are deteriorating sharply, and after the crisis they are likely to be higher than the ratios of other Aaa-rated countries.”
Debt to revenue has more than doubled over the past three years and is now over 400 percent, which could lead to “potential stress” on finances, the report said.
“This whole financial crisis in Europe has actually benefitted the U.S. government in its access to finance,” Hess said in a telephone interview. “The U.S. Treasury market has become once again, as it was during the recent financial crisis globally, the safe haven, and therefore lots of money flows into the U.S. Treasury market and that is a very positive.”