Fitch Threatens Downgrade of US Debt Ratings

It begins – 

Fitch Ratings-New York/London-15 October 2013: Fitch Ratings has placed the United States of America’s (U.S.) ‘AAA’ Long-term foreign and local currency Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN). The ratings of all outstanding U.S. sovereign debt securities have also been placed on RWN, as has the U.S. Short-term foreign currency rating of ‘F1+’. The Outlook on the Long-term ratings was previously Negative. The U.S. Country Ceiling has been affirmed at ‘AAA’.

Fitch expects to resolve the RWN by the end of Q114 at the latest, although timing would necessarily reflect developments and events, including the duration of any agreement to raise the debt ceiling.

KEY RATING DRIVERS
In line with Fitch’s previous statements, the RWN reflects the following key rating drivers and their relative weights:

High
– The U.S. authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures. The U.S. Treasury Secretary has said that extraordinary measures will be exhausted by 17 October, leaving cash reserves of just USD30bn. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.

– Although the Treasury would still have limited capacity to make payments after 17 October it would be exposed to volatile revenue and expenditure flows. The Treasury may be unable to prioritise debt service, and it is unclear whether it even has the legal authority to do so. The U.S. risks being forced to incur widespread delays of payments to suppliers and employees, as well as social security payments to citizens – all of which would damage the perception of U.S. sovereign creditworthiness and the economy.

– The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S. This “faith” is a key reason why the U.S. ‘AAA’ rating can tolerate a substantially higher level of public debt than other ‘AAA’ sovereigns.

Medium
– The repeated brinkmanship over raising the debt ceiling also dents confidence in the effectiveness of the U.S. government and political institutions, and in the coherence and credibility of economic policy. It will also have some detrimental effect on the U.S. economy.

Source:

Fitch Ratings

What's been said:

Discussions found on the web
  1. best nomos replica watches commented on Sep 18

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  2. Bitcoin Loophole Review commented on Sep 21

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  3. Blazing Trader Review commented on Sep 23

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  4. Buy THC Vape Cartridges Online commented on Sep 23

    … [Trackback]

    […] Read More Info here to that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  5. order THC concentrates online commented on Sep 23

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  6. bitcoin registrarse chile commented on Sep 30

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  7. bitcoin blazing trader commented on Sep 30

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

  8. bitcoin era commented on Oct 01

    … [Trackback]

    […] There you will find 7136 additional Information to that Topic: thereformedbroker.com/2013/10/15/fitch-threatens-downgrade-of-us-debt-ratings/ […]

Read this next.