Standard & Poor's maintains the US AA+ rating between deficits and yield fluctuations: Tariff revenues hedge the impact of the "big and beautiful" law.

One of the three major credit rating agencies, S&P Global Ratings, stated that despite the recent "big and beautiful" tax expenditure bill impacting the US fiscal system and causing long-term (10 years and above) Treasury bond yields to continue fluctuating at historical highs, the US is still able to maintain the strong resilience of its credit system, partly due to the fiscal revenue brought in by tariffs that will alleviate the fiscal impact and pain on the US. The agency has confirmed the credit rating of this resilient global largest economy. In its latest announcement, S&P maintained the long-term credit rating of the US at AA+, while also maintaining its short-term credit rating at A-1+. The long-term outlook remains stable. Tariffs can offset concerns about deficits "As effective tariff rates rise, we expect substantial tariff revenues to broadly offset potentially weaker US fiscal outcomes associated with recent US fiscal legislation, which includes both tax cuts and increases in tariff revenues and expenditures." Analysts from S&P, including Lisa Schineller, wrote in a report. S&P's latest rating decision can be seen as a positive factor for US President Donald Trump. Previously, he rejected S&P's view that "boldly implementing tariffs will harm the US economy." While S&P analysts did not refute Trump's view in the latest report, they at least pointed out one benefit of tariffs: while significantly increasing fiscal spending in other areas, tariffs have brought in revenue boost for the government. US tariff revenue reached a record high in July, climbing to around $28 billion. US Secretary of the Treasury Scott Bessent even stated that annual tariff revenue in 2025 could "far exceed 1% of US GDP," and slightly revised his previous forecast of $300 billion. However, the bipartisan US Congressional Budget Office estimates that the recent budget bill will increase the US fiscal budget deficit by about $3.4 trillion over the next 10 years. S&P's latest views are crucial for investors in the world's largest bond market. Since Trump returned to the White House in January, investors have been worried about the fiscal deficit and broader debt sustainability issues. Concerns and negative sentiment brought by tariff worries and the Trump administration's tax bills totaling trillions of dollars have pushed 30-year Treasury bond yields to over 5% in May. "The phenomenon of 'term premium' highlights the market's concerns about the increasingly substantial US bond interest," During Tuesday's Asian early trading session, the 30-year Treasury bond yield remained at 4.93%, while the 10-year Treasury bond yield, known as the "global anchor for pricing," reported 4.33%, still staying at relatively high levels since the beginning of the year. After Trump-led "big and beautiful" bills are passed, the government's fiscal deficit may significantly expand. Coupled with the expectation of a rate hike by the Bank of Japan leading to a sharp increase in long-term Japanese bond yields, these factors together have exacerbated the ongoing upward pressure on US Treasury yields, especially the 10-year Treasury bond yield, known as the "global asset pricing anchor," and longer-term US bond yields may be heading towards a significant upward trajectory. The issuance of massive US debt during the Biden administration has greatly increased the size of US debt to $36 trillion in just a few years, leading to a high fiscal budget deficit and record high US bond interest payments. With the passage of the "big and beautiful" bill that will bring more significant budget deficits, the market is increasingly concerned that US bond yields in all durations may continue to soar in 2025, especially longer-term US bond yields (10 years and above), which may continue to remain near historical highs under the push of the increasing "term premium." "It's a complex issue," said Homin Lee, senior macro strategist at Lombard Odier Ltd. in Singapore. "These numbers are still minor differences close to the top of the rating pyramid, and do not indicate any substantive changes in the health of the US fiscal situation." In May, the US lost its last "highest rating" from the three major rating agencies, when Moody's Ratings downgraded the US sovereign rating from Aaa to Aa1. Moody's attributed this to the expanding budget deficit caused by successive US governments and Congresses, with almost no signs of relief. Prior to that, Fitch Ratings and S&P had already downgraded the US credit rating from the highest AAA rating. S&P stated that the stable outlook given implies its expectation that in the next few years, although the US fiscal deficit will not significantly improve, it will not continue to deteriorate. The agency predicts that over the next three years, the US government's net debt will exceed 100% of GDP, but believes that the average general government deficit from 2025 to 2028 will be 6%, which is expected to be lower than last year's 7.5%. Fiona Lim, senior foreign exchange strategist at Malayan Banking Bhd, stated that after the Trump administration's tax reduction and expenditure bill raised continuous doubts about the sustainability of US debt, S&P's relatively positive rating reaffirmation may be favorable for the US dollar and US bonds. But this strategist also mentioned that the more lasting driving factors would come from the Federal Reserve meeting minutes and the keynote speech by Federal Reserve Chairman Jerome Powell at the Jackson Hole Global Central Bank Annual Meeting on Friday. During Tuesday's Asian trading session in the morning, a measure of the US dollar rose by about 0.1%.