Moody’s Places U.S. on Review for Downgrade As Debt Talks Stall

The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.

“It certainly underscores the importance of passing the debt ceiling and not putting us in default status, and making sure there’s a longer term fiscal plan to contain spending and the deficit we’ve been running up over the last few years,” said Anthony Cronin, a Treasury bond trader at Societe General SA in New York, one of the 20 primary dealers that trade with the Federal Reserve. “Maybe it’s the impetus to say we’ll need more of a concession.”

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One comment on “Moody’s Places U.S. on Review for Downgrade As Debt Talks Stall

  1. Capt. Father Warren says:

    [i]What we’re looking for is a raising of the limit. It doesn’t matter the process that they get there,” ….“The rating outlook will be determined by the longer-term debt trajectory.” [/i]

    I think Moody’s may be doing a diservice to those who follow its ratings. Of course, didn’t they miss the whole housing bubble burst?

    They just want the limit raised, don’t care how? But the long term debt trajectory matters? Then they darn well better care about the process, because the President and friends will shoot the trajectory to the moon and beyond!