NEW YORK (Reuters) - Moody's on Friday downgraded the credit rating of the United States by a notch to "Aa1" from "Aaa", citing rising debt and interest "that are significantly higher than similarly rated sovereigns."

U.S. President Donald Trump's sweeping tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress.

As written, the bill would add trillions of dollars to the federal government's $36.2 trillion in debt over the next decade.

"Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's said in a statement.

U.S. Treasury securities fell and yields rose late Friday after the news.

COMMENTS:

KEITH LERNER, CO-CHIEF INVESTMENT OFFICER, TRUIST ADVISORY SERVICES, ATLANTA

"There were some signs that we were moving that way (toward a downgrade). It's just a surprise that it is happening now before we've actually passed new legislation around the tax bill."

"It could give people an excuse to take a little bit of profits, but I don't know that this is a game changer overall."

"There's a tug of war in the markets right now in how much pro-growth policies do we want versus the deficit moving higher and the interplay with interest rates."

DARRELL DUFFIE, PROFESSOR OF FINANCE AT STANFORD UNIVERSITY'S GRADUATE SCHOOL OF BUSINESS, FORMERLY ON MOODY'S BOARD OF DIRECTORS

"It basically adds to the evidence that the United States has too much debt... I think the message has already been received by policymakers, I'm not sure what they're going to do about it. Congress is just going to have to discipline itself, either get more revenues or spend less."

STEPHEN MOORE, FORMER SENIOR ECONOMIC ADVISOR TO PRESIDENT DONALD TRUMP AND HERITAGE FOUNDATION ECONOMIST

"Outrageous. Moody's has now become a political arm of the Democratic Party. How is extending the Trump tax cut going to reduce the value of the bonds. If a US backed government bond isn't triple A asset then what is?"

CHRISTOPHER HODGE, CHIEF US ECONOMIST, NATIXIS, NEW YORK

"Fiscal profligacy and irresponsible governance - including the perpetual debt ceiling standoffs - aren't new and there will be a day of fiscal reckoning when Congress will have to reign in debt. But the US borrowing capacity is still unrivaled and potential revenue generation is unmatched. No doubt the US has a spending fueled debt problem, but there is little chance - at least in the medium term - that the US won't make good on its obligations. At some point the market will impose discipline that will force cuts but demand at the moment is still ample for US debt."

TOM DI GALOMA, MANAGING DIRECTOR OF RATES AND TRADING, MISCHLER FINANCIAL, PARK CITY, UTAH

"Very surprising. This is big, markets were not expecting this at all. I think that is highlighting the problems on the budget talks in Congress, the bill failed to pass today in the House committee."

SPENCER HAKIMIAN, CEO, TOLOU CAPITAL MANAGEMENT, NEW YORK

"The downgrade of the US credit rating by Moody's is a continuation of a long trend of fiscal irresponsibility that will eventually lead to higher borrowing costs for the public and private sector in the United States."

"I didn't even blink, totally not a surprise for me."

BRIAN BETHUNE, ECONOMICS PROFESSOR, BOSTON COLLEGE, NEWTON MASSACHUSETTS

"This sounds similar to what S&P did in 2011. That S&P (downgrade) announcement was not well received by markets, and led to a budget sequester agreement...which led to a reduction in the deficit. Then Trump cut taxes (in his first term) so we backed out of the compromise."

"The downgrade is a wake-up call for Republicans. They have got to come up with a credible budget agreement that puts the deficit on a downward trajectory."

JAY HATFIELD, CEO, INFRASTRUCTURE CAPITAL ADVISORS, NEW YORK

"This news comes at a time when the markets are very vulnerable and so we are likely to see a reaction. I expect S&P to be down by nearly 100 points or so but expect it to stabilize later in the week. I suspect that all the tariff related announcement could have had also played a role in the downgrade, even if they don't say so."

(Compiled by the Global Finance & Markets Breaking News team)