S&P Keeps the US at AA+ with a Stable Outlook, but Fiscal Pressure Remains the Core Weakness
S&P Global Ratings has affirmed the United States’ long-term sovereign credit rating at AA+ and its short-term rating at A-1+, with a stable outlook, in a decision published on 26 June. The affirmation keeps the US one notch below the top AAA grade at S&P, but removes an immediate rating risk at a time when markets remain sensitive to the country’s debt path, Treasury issuance needs and fiscal policy direction.
The agency’s central message is that the US still benefits from exceptional credit strengths, including the scale and diversity of its economy, deep capital markets, the dollar’s reserve-currency role, broad-based government revenue and credible monetary policy institutions. Those strengths continue to offset a fiscal profile that remains weak compared with most other highly rated sovereigns.
The fiscal numbers behind the call
The fiscal figures explain why the rating stays capped at AA+ rather than returning to AAA. S&P expects the general government deficit to average about 6.0 percent of GDP between 2026 and 2029, lower than the estimated 6.9 percent in 2025 but still a very large gap for an advanced economy outside a recession. In practical terms, the federal government is expected to keep borrowing heavily even if growth stays resilient.
The debt trajectory is the more important signal. S&P expects net general government debt to rise beyond 100 percent of GDP by 2029, from about 96 percent in 2025. For an issuer with the world’s deepest bond market that does not create an immediate financing problem, but it reduces fiscal flexibility and leaves the rating more exposed if interest costs rise, growth slows or political gridlock prevents credible deficit control. The agency also pointed to revenue, including continued tariff income, as one factor that may help prevent the deficit from deteriorating further, though tariff receipts support revenue only at the margin and do not close the structural gap between spending commitments and recurring revenue.
Where the US stands among the major agencies
The affirmation leaves S&P aligned with Fitch at AA+, while Moody’s cut the US to Aa1 in 2025, so all three major agencies now rate the US below the absolute top tier but within the very-high-grade category. The decision is a stability signal rather than an upgrade signal: it tells investors the US still has enough economic, institutional and financial-market strength to absorb high deficits for now, without removing the longer-term fiscal warning. S&P has rated the US at AA+ since 2011, when it removed the AAA following debt-ceiling tensions, and fifteen years on the rating reflects a durable view that the fiscal position is weaker than the AAA category would imply.
Why it matters
US sovereign creditworthiness is the anchor of the global financial system, with Treasury securities the benchmark risk-free asset for pricing, collateral, reserves and liquidity. A stable AA+ supports continuity in the Treasury market and limits the risk of a rating-driven shock to global portfolios. For MENA economies the transmission is direct: most Gulf currencies are pegged to the dollar, so US monetary conditions and Treasury yields feed into local rate settings and funding costs, and regional central banks, sovereign wealth funds and banks hold large dollar-asset positions tied to the US curve. The same decision also flags a structural risk: if deficits stay large and debt keeps rising, heavy Treasury supply and elevated term premiums could raise external financing costs and shape valuations across regional markets. For Gulf reserve managers the affirmation is reassuring but not a reason to ignore duration and concentration risk, since persistent deficits can keep issuance heavy and leave long-dated Treasuries more sensitive to inflation, fiscal and political news.
Outlook
The next two years will decide whether the stable outlook stays comfortable. The key indicators are the deficit path, net debt as a share of GDP, real growth, interest costs and the durability of revenue including tariffs. If deficits stabilize near the projected 6 percent of GDP and growth holds, the AA+ rating should remain well supported; if fiscal slippage becomes persistent or debt dynamics worsen materially, the outlook could come under pressure. For now, the US remains a very-high-grade sovereign credit, but no longer one with fiscal metrics consistent with the strongest rating category.
Sources: S&P Global Ratings; Bloomberg.
