Moody's Turns Negative on US Credit Rating

FILE PHOTO: Signage is seen outside the Moody's Corporation headquarters in Manhattan, New York, US, November 12, 2021. REUTERS/Andrew Kelly/File Photo
FILE PHOTO: Signage is seen outside the Moody's Corporation headquarters in Manhattan, New York, US, November 12, 2021. REUTERS/Andrew Kelly/File Photo
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Moody's Turns Negative on US Credit Rating

FILE PHOTO: Signage is seen outside the Moody's Corporation headquarters in Manhattan, New York, US, November 12, 2021. REUTERS/Andrew Kelly/File Photo
FILE PHOTO: Signage is seen outside the Moody's Corporation headquarters in Manhattan, New York, US, November 12, 2021. REUTERS/Andrew Kelly/File Photo

Moody's on Friday lowered its outlook on the US credit rating to "negative" from "stable" citing large fiscal deficits and a decline in debt affordability, a move that drew immediate criticism from President Joe Biden's administration.
The move follows a rating downgrade of the sovereign by another ratings agency, Fitch, this year, which came after months of political brinkmanship around the US debt ceiling.
Federal spending and political polarization have been a rising concern for investors, contributing to a selloff that took US government bond prices to their lowest levels in 16 years.
"It is hard to disagree with the rationale, with no reasonable expectation for fiscal consolidation any time soon," said Christopher Hodge, chief economist for the US at Natixis. "Deficits will remain large ... and as interest costs take up a larger share of the budget, the debt burden will continue to grow."
The ratings agency said in a statement that "continued political polarization" in Congress raises the risk that lawmakers will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability."
"Any type of significant policy response that we might be able to see to this declining fiscal strength probably wouldn't happen until 2025 because of the reality of the political calendar next year," William Foster, a senior vice president at Moody's, told Reuters in an interview.
Republicans, who control the US House of Representatives, expect to release a stopgap spending measure on Saturday aimed at averting a partial government shutdown by keeping federal agencies open when current funding expires next Friday.
Moody's is the last of the three major rating agencies to maintain a top rating for the US government. Fitch changed its rating from triple-A to AA+ in August, joining S&P which has had an AA+ rating since 2011.
While it changed its outlook, indicating a downgrade is possible over the medium term, Moody's affirmed its long-term issuer and senior unsecured ratings at 'Aaa' citing US credit and economic strengths.
Immediately after the Moody's release, White House spokesperson Karine Jean-Pierre said the change was "yet another consequence of congressional Republican extremism and dysfunction."
“While the statement by Moody’s maintains the United States’ Aaa rating, we disagree with the shift to a negative outlook. The American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset," Reuters quoted Deputy Treasury Secretary Wally Adeyemo as saying in a statement.
Adeyemo said the Biden administration had demonstrated its commitment to fiscal sustainability, including through over $1 trillion in deficit reduction measures included in a June agreement struck with Congress on raising the US debt limit, and Biden’s proposal to reduce the deficit by nearly $2.5 trillion over the next decade.
Treasury yields have soared this year on expectations the Federal Reserve will keep monetary policy tight, as well as on US-focused fiscal concerns.
The sharp rise in Treasury yields "has increased pre-existing pressure on US debt affordability," Moody's said.



Iraq’s Oil Ministry Says Procedures for Oil Exports through Turkish Pipeline Complete

The Iraqi oil minister's announcement comes after the Iraqi parliament approved on February 2 a budget amendment that set a rate of $16 per barrel for oil transport and production costs in Kurdistan. (AFP)
The Iraqi oil minister's announcement comes after the Iraqi parliament approved on February 2 a budget amendment that set a rate of $16 per barrel for oil transport and production costs in Kurdistan. (AFP)
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Iraq’s Oil Ministry Says Procedures for Oil Exports through Turkish Pipeline Complete

The Iraqi oil minister's announcement comes after the Iraqi parliament approved on February 2 a budget amendment that set a rate of $16 per barrel for oil transport and production costs in Kurdistan. (AFP)
The Iraqi oil minister's announcement comes after the Iraqi parliament approved on February 2 a budget amendment that set a rate of $16 per barrel for oil transport and production costs in Kurdistan. (AFP)

Iraq's oil ministry said in a statement on Saturday that all procedures had been completed to allow the resumption of exports through the Iraq-Türkiye pipeline.

Iraq's oil minister said on Monday that oil exports from the semi-autonomous Kurdistan region will resume next week, resolving a near two-year dispute that has disrupted crude flows as ties between Baghdad and Erbil improve.

US President Donald Trump's administration is putting pressure on Iraq to allow Kurdish oil exports to restart or face sanctions alongside Iran, sources have told Reuters. An Iraqi official later denied pressure or the threat of sanctions.

The federal government of Iraq and the Kurdistan Regional Government (KRG) held technical talks following the oil minister's statements earlier this week to iron out details necessary for the resumption of exports, such as a payment mechanism acceptable to oil companies.

The Iraqi oil minister's announcement comes after the Iraqi parliament approved on February 2 a budget amendment that set a rate of $16 per barrel for oil transport and production costs in Kurdistan.

The amendment also requires the KRG transfer its oil output to the state-run State Oil Marketing Organization (SOMO)

The oil ministry in its Saturday statement asked the KRG to start delivering crude to SOMO in order for exports to resume.