Rating agencies Moody’s and Fitch expect the U.S. Congress will likely reach an agreement on a new debt limit before the Treasury drains resources to stave off a debt default.
Rating agencies Moody’s and Fitch both have a triple-A rating for the United States – the highest credit quality status they can assign to a borrower. S&P Global’s sovereign rating for the United States is ‘AA+’, the second highest rating by the agency.
“Given an extremely fractious political environment, we anticipate an agreement will likely only be reached very late or in an incremental fashion, potentially contributing to flare-ups in financial market volatility,” Moody’s Investors Service said in a note on Thursday. Richard Francis, a senior director at Fitch Ratings, told Reuters he also expected a debt limit agreement would be reached before a so-called X date, which is when the government exhausts its cash and borrowing capacity, as it has been the case in similar circumstances in the last decade.
Should the government be unable to pay some of its obligations, he added, “that would not be consistent with what we would expect from a triple-A rating.”Moody’s said in its note that while a U.S. missed interest payment was unlikely, it would consider it an event of default.
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