Stricter Credit Ratings for US Companies: A Challenge for Global Markets

The downgrades of US companies by rating agencies have recently increased, particularly for highly indebted corporations. In the second quarter of 2025, corporate debts with investment-grade ratings amounting to $94 billion were downgraded, surpassing for the first time since early 2021 the volume of upgraded debts.

Causes for the Stricter Ratings

Increased interest costs and declining revenues, triggered by US tariff policy, are the main reasons for these strict credit ratings. Economic uncertainty and an impending escalating trade conflict exacerbate the situation. One example is Warner Bros Discovery, whose bonds were downgraded to junk status despite ongoing ratings from Fitch, Moody’s, and S&P. These downgrades led to forced sales by funds with investment-grade mandates.

Despite the negative developments, bonds from US companies remain in demand; the risk premiums are below the long-term average, indicating market complacency.

Impacts on European Markets

While more downgrades are occurring in the US, European companies are seeing more upgrades than downgrades. In the second quarter of 2025, about 50% more improvements than deteriorations were recorded in the investment-grade segment. However, high-yield companies in Europe predominantly had to endure downgrades.

Negative developments concerning highly indebted US corporations could significantly impact European markets, as global capital markets are closely intertwined. Increased risks and higher financing costs in the US could also put pressure on European firms.

In summary:

This development illustrates that US companies are being rated more strictly due to their debt levels, which could potentially have negative effects on European markets.