US Debt Rates Itself

Does US government debt even have a credit rating? I mean, it does. It has three, or probably more, but three big ones. Since 2011, the US government has had an AA+ rating at Standard & Poor’s; since August 2023, it has had an AA+ rating at Fitch. Until last week, it had an Aaa rating at Moody’s Ratings, but on Friday that too was cut to Aa1. AAA (or Aaa) is the best rating; AA+ (or Aa1) is the second-best rating.

But what is a credit rating? In some sense, there are companies — “ratings agencies” or “nationally recognized statistical ratings organizations” — that employ people who think about the creditworthiness of companies and governments and asset-backed securities, and who come up with ratings that tell investors how creditworthy their bonds are. If you are an investor, you might trust the ratings agencies to tell you what bonds to buy. If you want to buy risky bonds, you can buy bonds with “junk” ratings (or more politely “high yield,” BB+/Ba1 or lower). If you want to buy safe bonds, you can buy bonds with “investment grade” ratings (BBB-/Baa3 or higher). If you want to buy only the very safest bonds, you can stick to bonds with AAA/Aaa ratings.