On July 21, local time, the international rating agency Fitch stated that policy risks cast a shadow over the credit outlook for the United States. In its mid-year update, Fitch downgraded the outlook for the U.S.’s 25% industry sector to “improving” due to increased uncertainty, slower economic growth, and expectations that interest rates will remain high for an extended period.
Fitch noted that recent tax and spending bills highlight long-term challenges facing the U.S. fiscal outlook and will put pressure on the healthcare sector. The combination of the tax bill and the extension of previous tax cuts is likely to keep the U.S. government’s total deficit above 7% of GDP, and by 2029, it could push the debt-to-GDP ratio to 135%.
Fitch predicts that by 2025, the default rates for high-yield bonds and leveraged loans in the U.S. will rise to 4.0% to 4.5% and 5.5% to 6.0%, respectively. Policy developments and industry-specific risks will continue to be the main drivers of ratings trends within this year. (Zhao Miao, CCTV)