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Factbox-Top US credit rating under watch as debt ceiling talks drag on
Published May 26, 2023 07:17AM ET
Updated May 26, 2023 04:26PM ET
© Reuters. The U.S. Capitol building is seen in Washington, U.S., April 6, 2023. REUTERS/Elizabeth Frantz
(Reuters) - Drawn-out negotiations between the White House and Republicans to raise the $31.4 trillion debt ceiling have unnerved markets and fanned worries about the economic impact of a possible default.
Global rating agencies have warned of a downgrade of the country if a deal is not reached soon. Following are some of the actions by the agencies in recent days:
Fitch:
Fitch earlier this week put the U.S. credit rating on watch for a possible downgrade. The agency currently rates the country's debt "AAA" - its highest rank.
Fitch said it still expects the standoff to be resolved before the X-date, the deadline after which the federal government would not have enough finances to meet its payments.
Treasury Secretary Janet Yellen has insisted that the actual X-date is June 1, but some Republicans have questioned that deadline.
Fitch has also placed 11 ratings of U.S. credit-linked notes (CLNs) on ratings watch with negative implications.
Moody's (NYSE:MCO):
The agency expects the U.S. government will continue to pay its debts on time, but public statements from lawmakers during the negotiations could prompt a change in its assessments of the U.S. credit outlook before a potential default.
Moody's currently has an "Aaa" rating for the U.S. government with a stable outlook - its highest creditworthiness evaluation.
S&P Global (NYSE:SPGI):
The agency has not put U.S. ratings on watch yet, but has had its second-highest rating on the country since 2011, in contrast to Fitch and Moody's.
That year, S&P took a bold call to cut U.S. rating to "AA-plus" from its highest "AAA" even as a default was narrowly averted.
The agency cited heightened political polarization and insufficient steps to right the nation's fiscal outlook for its decision.
DBRS Morningstar:
On Thursday, DBRS Morningstar put the U.S. on review for a downgrade, warning of the implications of not reaching a deal soon.
Another agency, Scope Ratings, also placed its 'AA' rating for the U.S. under review earlier this month for a possible downgrade due to longer run risks associated with the debt ceiling.
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