US debt is increasingly at the mercy of the market as interest costs surge as debt ceiling looms

Key Points:

• Scope Ratings maintained the U.S. sovereign credit rating at AA-, three notches below the top rating and two below Moody’s, Fitch, and S&P Global Ratings, citing a strong economy and deep capital markets as positives.
• The agency warned of worsening deficits due to structural expenditure pressures, limited political will for fiscal reform, and rising debt-servicing costs, with government debt potentially reaching 160% of GDP by 2036 without stronger growth or fiscal adjustments.
• Rising 10-year Treasury yields, now at 5.27%, exceed long-term Congressional Budget Office forecasts, potentially adding $3.5 trillion to the debt over the next decade if yields remain elevated.
• The U.S. is shifting debt issuance toward shorter maturities, making refinancing costlier amid rising yields and increased market volatility due to more price-sensitive hedge fund participation replacing stable foreign central bank holdings.
• Scope highlighted risks from the approaching $41.1 trillion debt ceiling expected by early 2027, warning that political standoffs over raising the limit could increase market volatility and expose fiscal governance weaknesses.