Economic news

Fitch puts U.S. on negative rating watch amid debt deal deadlock

2023.05.25 00:24


© Reuters.

Investing.com– Ratings agency Fitch placed the United States’ ‘AAA’ rating on Rating Watch Negative on late-Wednesday, citing increased uncertainty over whether the country will raise its debt ceiling as lawmakers struggle to reach a deal.

While the ratings agency still expects lawmakers to reach a deal before an early-June deadline, it said that recent sparring over raising the debt ceiling had brought up risks of a potential U.S. default. 

“The brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to U.S. creditworthiness,” Fitch said in a statement.

Fitch said that the government will log a deficit of 6.5% in 2023 and 6.9% in 2024, compared to 5.5% in 2024. 

The agency added that avoiding a default by unconventional means, which include minting a trillion-dollar coin or invoking the 14th amendment, would also be detrimental to a AAA rating.

While Fitch emphasized on the low probability of a debt default, the ratings agency said that such a scenario would result in the U.S. being downgraded to a Restricted Default, and that debt securities affected by the default would be downgraded to a ‘D’- its lowest rating.

Other securities with payments within the next 30 days would be downgraded to a ‘CCC’, and short-term treasuries maturing in the following 30 days will be downgraded to ‘C’.

Still, the ratings agency said that the U.S. country ceiling would likely still remain at ‘AAA’, its highest rating, citing the reserve currency status of the dollar. 

The warning from Fitch comes as Democrat and Republican lawmakers spar over raising the $31 trillion debt limit, after it was reached in January. Republicans have called for spending cuts and more scrutiny over government cash aid, while the Democrats have pushed for raising the debt ceiling with few caveats.

A downgrade of the U.S. rating would be the first by a major ratings agency since S&P Global Inc (NYSE:) cut the country to ‘AA+’ from ‘AAA’ in 2011, which was also over raising the U.S. debt ceiling. The move had drawn widespread criticism, and had also triggered sharp declines in global markets. 

Fitch has warned of potential U.S. downgrades consistently over the past decade, with a bulk of the warnings related to raising the U.S. debt ceiling and government spending. 

The dollar showed little reaction to the Fitch warning, while U.S. stock futures were mixed. 

Source link

Related Articles

Back to top button
bitcoin
Bitcoin (BTC) $ 98,107.29 0.20%
ethereum
Ethereum (ETH) $ 3,372.33 1.69%
tether
Tether (USDT) $ 1.00 0.12%
solana
Solana (SOL) $ 252.96 2.27%
bnb
BNB (BNB) $ 660.45 0.12%
xrp
XRP (XRP) $ 1.40 5.01%
dogecoin
Dogecoin (DOGE) $ 0.423772 4.10%
usd-coin
USDC (USDC) $ 1.00 0.11%
cardano
Cardano (ADA) $ 1.02 6.32%
staked-ether
Lido Staked Ether (STETH) $ 3,369.71 1.79%
tron
TRON (TRX) $ 0.208936 3.05%
avalanche-2
Avalanche (AVAX) $ 41.36 2.64%
the-open-network
Toncoin (TON) $ 6.09 5.20%
stellar
Stellar (XLM) $ 0.516832 14.84%
shiba-inu
Shiba Inu (SHIB) $ 0.000026 5.89%
wrapped-steth
Wrapped stETH (WSTETH) $ 3,991.59 1.69%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 97,748.19 0.30%
polkadot
Polkadot (DOT) $ 8.70 7.59%
chainlink
Chainlink (LINK) $ 17.80 1.43%
bitcoin-cash
Bitcoin Cash (BCH) $ 511.25 1.85%
weth
WETH (WETH) $ 3,373.59 1.65%
sui
Sui (SUI) $ 3.37 4.70%
near
NEAR Protocol (NEAR) $ 6.97 7.61%
pepe
Pepe (PEPE) $ 0.00002 4.02%
leo-token
LEO Token (LEO) $ 8.61 0.50%
litecoin
Litecoin (LTC) $ 96.65 5.32%
aptos
Aptos (APT) $ 12.27 7.57%
uniswap
Uniswap (UNI) $ 10.90 0.85%
wrapped-eeth
Wrapped eETH (WEETH) $ 3,549.92 1.79%
internet-computer
Internet Computer (ICP) $ 11.33 5.46%
hedera-hashgraph
Hedera (HBAR) $ 0.140576 8.44%
usds
USDS (USDS) $ 1.00 0.12%
crypto-com-chain
Cronos (CRO) $ 0.185676 6.34%
polygon-ecosystem-token
POL (ex-MATIC) (POL) $ 0.558734 5.82%
ethereum-classic
Ethereum Classic (ETC) $ 28.50 6.21%
render-token
Render (RENDER) $ 8.04 0.36%
fetch-ai
Artificial Superintelligence Alliance (FET) $ 1.51 3.05%
bittensor
Bittensor (TAO) $ 528.78 2.34%
ethena-usde
Ethena USDe (USDE) $ 1.00 0.10%
kaspa
Kaspa (KAS) $ 0.151623 2.33%
whitebit
WhiteBIT Coin (WBT) $ 24.47 1.16%
blockstack
Stacks (STX) $ 2.34 9.74%
bonk
Bonk (BONK) $ 0.000046 5.19%
dai
Dai (DAI) $ 1.00 0.12%
arbitrum
Arbitrum (ARB) $ 0.850482 5.21%
vechain
VeChain (VET) $ 0.042605 2.01%
filecoin
Filecoin (FIL) $ 5.61 6.98%
cosmos
Cosmos Hub (ATOM) $ 8.50 9.50%
okb
OKB (OKB) $ 54.94 6.32%
mantra-dao
MANTRA (OM) $ 3.65 2.49%