Moody’s warning on the massive U.S. debt burden has turned into a nonevent

There was a time when bad news about U.S. debt would send markets into a tailspin, but not this month.

Markets on Monday shrugged at a warning Friday from Moody’s Investor’s Service that it was lowering its ratings outlook on Treasurys. The big-three ratings agency said high levels of government debt and deficits coupled with political brinkmanship in Washington could jeopardize the global standing of government-issued fixed income.

When Standard & Poor’s and Fitch issued similar warnings, they sent at least temporary shockwaves through Wall Street.

But with the domestic fiscal and political mess seemingly old news, the ratings service saber-rattling just doesn’t seem to have the same impact.

“If we go from triple-A to double-A, what does that practically mean? It doesn’t really mean anything. There’s still going to be demand for U.S. Treasurys en masse,” said Michael Reynolds, vice president of investment strategy at Glenmede Investment Management. “There’s no piercing insight from Moody’s that they have proprietary information that nobody knows about the U.S. government. So, it’s really a nonevent.”

Indeed, no one has to tell investors about the $33.7 trillion U.S. debt and the $1.7 trillion deficit in fiscal 2023. Both are well-known issues with which Wall Street wrestles daily.

The Moody’s news merely echoes those problems. Despite its warning, the service is the only one of the big-three agencies that still has a triple-A rating on U.S. debt; Fitch lowered its rating in August, and S&P made its move 12 years ago.

Things were relatively quiet in the markets Monday, the first trading day after the Moody’s announcement that it was taking its outlook to negative from stable. Major stock market indexes posted muted gains, while yields on long-dated Treasurys rose slightly.

Earlier last week, markets…