Fitch places US AAA rating on negative debt ceiling watch

Visitors walk in the U.S. Capitol Square amid ongoing negotiations seeking a deal to raise the U.S. debt ceiling and avert a catastrophic default, in Washington, U.S., on 24 May 2023.

Jonathan Ernest | Reuters

Fitch has placed the AAA long-term default rating of U.S. foreign currency issuers on negative watch Wednesday eveningpointing to the tightrope on the debt ceiling.

“The Rating Watch Negative reflects heightened political partisanship that prevents finding a solution to raise or suspend the debt ceiling despite the fast approaching x date,” the rating agency said.

Futures contracts linked to the Dow Jones Industrial Average briefly slipped about 100 points after Fitch, one of the big three rating agencies, released its rating.

The so-called X date, which is when the United States could default on its debt, could come as early as June 1, according to Treasury Secretary Janet Yellen.

Fitch noted that he still expects officials in Washington to reach a resolution before the deadline.

“However, we believe the risks have increased that the debt ceiling will not be raised or suspended by date x and therefore the government may start to miss payments on some of its obligations,” the agency said. rating.

The announcement comes after debt ceiling negotiations between teams representing President Joe Biden and House Speaker Kevin McCarthy failed to reach an agreement.

On Wednesday, McCarthy said talks on raising the debt ceiling were progressing toward an agreement, but the two sides continue to clash over spending. McCarthy offered hope that a deal would be reached before the deadline. But members of the House have been informed their holiday week would begin on Thursday, although they were warned they could be called back for a vote.


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