Yellen Rebukes Fitch's 'Unwarranted' Downgrade Of US Credit Rating: Treasuries Hit 9-Month Low

U.S. Treasury Secretary Janet Yellen is publicly criticizing Fitch’s decision to downgrade the United States’ credit rating, a move that led to a significant drop in stock prices on Wednesday.

The downgrade was deemed “entirely unwarranted” by Yellen.

Yellen, during a visit with Danny Werfel, commissioner of the Internal Revenue Service, expressed her surprise at Fitch’s move, especially given the country’s impressive economic rebound from the pandemic, CNBC reports.

Long-dated U.S. Treasury bonds fell on Wednesday as yields continued to rise, with the Ishares 20+ Year Treasury Bond ETF TLT plummeting to the lowest levels since November 2022.

Chart: Long-Term Treasuries Fall To The Lowest Level In Nearly 9 Months

Fitch’s Downgrade: A Flawed Assessment?

According to Fitch, the downgrade from AAA to AA+ was due to “expected fiscal deterioration over the next three years” and “repeated debt-limit political standoffs.” Yellen said that Fitch’s assessment is flawed and based on outdated data.

She argues that it fails to acknowledge the significant improvements in various indicators, including governance, over the last 2 1/2 years.

US Economy A Picture of Strength, Yellen Says

Yellen highlighted the robust state of the U.S. economy, pointing to the creation of over 13 million new jobs since January 2021, a near-historically low unemployment rate of 3.6%, and a consistent monthly decrease in overall annual inflation over the past year.

She further emphasized that despite Fitch’s decision, U.S. Treasury securities continue to be the world’s leading safe and liquid asset and the American economy remains fundamentally strong.

Read now: Deja Vu: After Fitch’s Cut To US Credit Rating, A Look At The Market Fallout From S&P’s 2011 Downgrade

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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