US to Keep Aaa-Rating After Debt Ceiling Hike or Cap
Moody’s Investors Services (NYSE:MCO) said Monday the US will retain the rating agency’s top-notch debt rating as long as it meets its interest payments even if the government’s borrowing cap is reinstated Thursday.
In November 2015, federal lawmakers suspended the federal debt ceiling, which would be about $19.9-T, if they do not vote to extend the suspension which ends Wednesday.
“While the periodic impasse over raising the debt ceiling is a credit negative feature of the country’s debt management, it has not affected the sovereign’s credit rating to date,” Moody’s analysts wrote in a research report published Monday.
Like Moody’s, Fitch has kept its top AAA-rating on US government debt.
Standard & Poor’s downgraded the U.S.’ rating by one notch to AA+ in August 2011. It cited its high level of debt and uncertainty about the federal government’s ability to manage that debt load following a debt ceiling showdown.
The US Treasury Department said last week it will embark “extraordinary measures” to meet its debt obligation if the debt ceiling goes into effect.
These steps include suspension of SLUGS, which are used by state and local governments to temporarily store the proceeds of their bond sales and ensure tax compliance; stopping investments in federal employee pension plans and halting sales of US savings bonds.
“There is little risk the Treasury will exhaust such measures before the end of fiscal year 2017. These extraordinary measures would have a limited impact on the economy,” Moody’s analysts said.
The US government’s current FY ends on 30 September.
US Treasury Secretary Steven Mnuchin Thursday called on Congress to raise the federal debt ceiling “at the first opportunity.” and announced the first of several likely cash management measures aimed at staving off a US default.
US Senate majority leader Mitch McConnell said Thursday the Unite States will not default on its debt and will raise its debt limit in some form or fashion.
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