Moody's raises outlook on U.S. sovereign rating to stable

Global rating agency Moody's Investors Service Thursday lifted its outlook on the U.S. government bond rating to stable from negative and reaffirmed the U.S. government's Aaa rating.

The move as based on the assessment that the federal government's debt trajectory is on track to meet the criteria laid out in August 2011 for a return to a stable outlook, removing the downward pressure on the rating over Moody's outlook period, it said in a statement.

Reasons cited for the revised outlook include declining U.S. budget deficits, the country's moderate economic growth and the secure status of the greenback as a global reserve currency, among others.

Moody's said that the U.S. economy has shown a degree of resilience to major cuts to the growth of government spending.

According to the Congressional Budget Office (CBO), the U.S. budget deficit for the 2013 fiscal year is likely to decline to 4.0 percent of GDP from 7.0 percent in 2012 -- a greater decline than Moody's had anticipated in 2011 when it assigned a negative outlook, the statement said.

Moreover, Moody's said the U.S. government's debt-to-GDP ratio through 2018 will demonstrate a more pronounced decline than Moody's had anticipated when it placed the negative outlook.

This steep decline is being driven by fiscal policy measures, including sequestration and tax hikes at the beginning of this year, as well as the U.S. economic growth trend that stands in stark contrast to the fiscal tightening and slowdown observed in other major global economies, Moody's said in the statement.

Moody's has placed a negative outlook on U.S. bonds since August 2011 but retained the country's triple-A rating, in hopes of urging the U.S. Congress to strengthen fiscal consolidation following the enactment of the Budget Control Act of 2011. The act raised the U.S. statutory debt limit to avoid a possible sovereign default.

The U.S. lost its gold-plated triple-A rating for the first time when rating agency Standard & Poor's lowered its long-term sovereign credit rating on the United States to AA+ on Aug. 5, 2011.