This Ratings agency Fitch places US bonds on “negative watch” on Wednesdayhas the highest rating (AAA) given by the firm for the lack of progress in reaching a budget agreement between the Democratic and Republican parties that avoids the suspension of payments. In a note, the agency stated that this warning of possible reductions “reflects an increase in political partisanship that hinders the scope of a decision to increase or suspend the debt limit despite date X fast approaching” around June 1.
Date X is the date the Treasury Department predicts the country will run out of reserves unless Congress agrees to raise the debt ceiling reached in January; and The legal limit of money the government can borrow. Fitch said it expects “a decision on the debt limit before date X”, but believes that risks “have increased”, will not be increased or suspended before then, and “as a result, the Government may begin to default.” some of its obligations”.
Regardless, the agency described its message as follows: US non-compliance estimated as ‘very unlikely’ there is an expectation that it will “remain at ‘AAA’ even in the suspension of payments scenario” in debt titles.
President Joe Biden and the leader of the Republicans in Congress, Kevin McCarthy, reassured this Wednesday that a suspension of payments is not an option and that they are moving forward, but the situation seems to be stuck with the president’s refusal to accept the opposition’s demands. To spend less than last year.
While U.S. debt is generally seen as a safe asset in financial markets, the country may occasionally default as the government can only borrow up to the limit set by Congress. In general, the country tends to raise or suspend the border unconditionally as requested by the White House, and this is what has happened in more than 70 cases since the 1970s. In 2011, a situation very similar to today’s resulted in the downgrade of the country’s credit rating from “AAA” to “AA+” by the risk agency Standard & Poor’s.