Fitch Ratings puts United States' AAA rating on 'negative watch' as debt ceiling deadline looms
Fitch put the country's ‘AAA’ rating, its highest rank, long-term foreign-currency issuer default rating (IDR) on rating watch negative to a possible downgrade if lawmakers fail to raise the amount that the Treasury can borrow before it runs out of money
PremiumRatings agency Fitch has put United States' AAA" rating, its highest rank, on a negative watch , raising the stakes as talks over the debt ceiling go down to the wire.
Fitch put the country's "AAA" rating, its highest rank, long-term foreign-currency issuer default rating (IDR) on rating watch negative in a precursor to a possible downgrade if lawmakers fail to raise the amount that the Treasury can borrow before it runs out of money, which could happen as soon as next week.
Fitch said that the failure to reach a deal "would be a negative signal of the broader governance and willingness of the U.S. to honor its obligations in a timely fashion," and would be unlikely to be consistent with a "AAA" rating.
“We believe risks have risen that the debt limit will not be raised or suspended before the X-date and consequently that the government could begin to miss payments on some of its obligations," Fitch said. “Prioritization
However, it added that it expects a resolution to the debt limit before the x-date (when the U.S. Treasury exhausts its cash position and capacity for extraordinary measures without incurring new debt).
In its report, Fitch said that the US reached its $31.4 trillion debt limit on January 19, 2023, and the Treasury began taking extraordinary measures in order to avoid breaching the ceiling.
The Treasury has stated that these extraordinary measures could be exhausted as early as June 1, 2023.
“The cash balance of the Treasury reached $76.5 billion as of May 23 and sizeable payments are due June 1-2, meaning that the x-date could arrive as the Treasury indicated and before an agreement is reached or finalized with votes in the House and Senate," it said.
(This is a developing story, more to come)
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