“US Debt Downgraded” sounds ominous. But the reality is more nuanced. On May 16, Moody’s officially joined Standard & Poor’s and Fitch in downgrading the US government’s credit rating, lowering it one notch from Aaa to Aa1. While a downgrade is never ideal, an Aa1 rating is still a very high credit quality. The US Treasury market is among the largest, most liquid, and most trusted in the world. And although the move underscores legitimate issues, it doesn’t imply the country is at risk of default. Let’s break down what the downgrade actually means, what prompted the decision, and why investors can largely take it in stride. What Is a Credit Rating and Why Does It Matter? Credit ratings are essentially report cards for borrowers — and in this case, the borrower is the US government. Assigned by major credit rating agencies like Moody’s, S&P, and Fitch, these ratings assess a country’s ability to meet its financial obligations. The highest possible rating (Aaa for Moody’s or AAA for S&P and Fitch) indicates that the borrower is extremely likely to repay its debts on time and