By boldness of the beard
New York (Reuters) -The United States has reduced the confrontation of Moodyz to exacerbate investor concerns about a debt bomb that can stimulate land in the bond market who want to see more financial restraint from Washington.
On Friday, the American Rating Agency in America reduced the last of the main classification agencies to reduce the country, noting concerns about the growing debt pile of $ 36 trillion.
The move came when Republicans who control the House of Representatives and the Senate seek to agree to a comprehensive package of tax cuts, spending excesses and safety network discounts, which can add trillions to the American debt pile. The uncertainty about the final form of the so -called “Big Beauty Bill” has investors evenly with the appearance of optimism about trade. The bill failed to clarify a major obstacle on Friday, even when US President Donald Trump called for unity on legislation.
“The bond market was watched about what is going on in Washington this year in particular,” said Carol Shlev, head of market strategies at BMO Private Wealth, who said that MOODY may make investors more cautious.
“While Congress discusses” a large and beautiful draft law, “she said, will do the two bonds to make them a financially responsible line,” referring to the bond investors who punish the bad policy by making it expensive for governments to borrow.
Spencer Hakamian, founder of Tolou Capital Management in New York, said the reduction of Moody’s, which follows similar moves from Fitch in 2023 and Standard & Poor’s in 2011, “will eventually lead to high borrowing costs for the public and private sector in the United States.
Nevertheless, the reduction in classifications is unlikely to obtain forced sales from money that can only invest in higher classification securities, Jenny Goldberg, the US price strategy at TD Securities, said, as most of the funds regenerate the guidelines after the S&P reduction. “But we expect to re -focus the market attention to the financial policy and the draft law that is currently negotiated in Congress,” Goldberg said.
Focus on Bell
Scott Clemins, chief investment expert in Brown Pradesh Hariman, said that the draft law shows that lightning spending may be inhibitors to add exposure to the long treasury.
The responsible federal budget committee, a non -partisan research tank, estimates that the bill can add approximately $ 3.3 trillion to the country’s debts by 2034 or about $ 5.2 trillion if policy makers extend temporary judgments.
Moody’s said on Friday that the successive departments failed to reflect the direction of the financial deficit and the costs of benefits, and it was not believed that the reductions of materials in the deficit will result from the financial proposals under consideration.
Anxiety appears in the market pricing. Anthony Woodside, head of the fixed income strategy at Legal & General Management America. Woodside said that the market “does not help much of credibility” for the deficit that was brought down in a material way.
Treasury Secretary, Scott Payette, said that the administration focuses on containing 10 -year returns. The return, which was last seen by 4.44 %, is about 17 basis points below, before Trump took office in January.
“You can definitely see a reaction to the return on a significant increase in the deficit at a time when we already manage a very big deficit,” said Garrett Melson, a wallet strategic expert with Natixis Investment Solutions.
A White House spokesman rejected concerns about the bill. “Experts are wrong, just as they were about the effect of Trump’s tariff, which resulted in trillion in investments, record growth, and inflation,” Harrison Fields, a special assistant to the president and deputy press secretary, said in a statement.
The White House was distinguished by reducing Moody as a political. White House of Communications Director Stephen Cheung’s reaction to this step was through a post on social media on Friday, where he ranked MOODY Economic expert, Mark Zandy, describing him as a political opponent of Trump. Zandy, the chief economist in Moody’s Analytics, rejected a separate entity from the classification agency, the comment.
Some believe in the market that financial expectations will improve with the tax package compared to previous expectations, due to customs tariff revenues and spending. Barclays is now estimated to cost the bill to increase the deficit of $ 2 trillion over the next ten years compared to expectations of $ 3.8 trillion before Trump took office.
X factor?
The urgency rises like the main timing approach. Parliament Speaker Mike Johnson said that he wanted to pass his room the bill before the American anniversary holiday on May 26, while BESSENT urged legislators to raise the limit of federal government debts by mid -July.
The United States government reached the point of legal borrowing in January and began to employ “unusual measures” to prevent it from violating the cover. Bessent indicated that the government can reach the so -called X -DATE – when it runs out of criticism to meet all its obligations – by August.
The investor’s nervousness has begun about the debt limit to appear. The average return on the treasury bills due in August is higher than the return of the adjacent entitlement bills.
While there is a wide agreement within the Republican Party to expand Trump’s tax cuts for 2017, there is a gap on how to achieve spending discounts that would help compensate for the loss of revenue.
The maneuvering room on spending discounts is limited. Compulsory spending, including social welfare programs that Trump pledges not to touch, is a vast majority of total budget spending last year.
Michael Zizas, a strategy in Morgan Stanley, said in a memorandum published last week that the political financial package will most likely lead to a wider deficit in the short term, and at the same time it will not provide a financial batch of the economy.
Ann Walsh, the chief investment official of Guggenheim Partners Investment Management.
“This is a non -sustainable course we face,” she said.
(I participated in Davide Barbuscia reports; additional reports by Carolina Mandel; edited by Megan Davis and Anna Driver)
