US debt: Credit ratings agencies poised to strip US of triple-A rating

19th July 2011

The stand-off between President Obama and his Republican opponents has, according to a source in The Guardian, "raised the probability of the US achieving a credible solution to the rising debt burden in the foreseeable future".

Gary Jenkins, head of fixed income research at brokers Evolution, said there was a "high probability" of the Standard & Poor's rating agency downgrading the US from its coveted triple A rating.

"Probability of the debt ceiling being raised – high. Probability of the US achieving a credible solution to the rising debt burden in the foreseeable future – low. Probability of S&P downgrading the US sovereign rating over the next three months – high."

Moody's has also warned thatit could downgrade the US. 

As reported in the Financial Times (paywall) on Monday Egan-Jones became the first US rating agency to downgrade the country’s sovereign credit rating from triple A to double A plus as it focuses on the rapid rise in outstanding debt over the past five years.

Egan-Jones was officially recognised in 2008 by the Securities and Exchange Commission and, unlike its larger rivals, generates revenue from institutional investors and not from issuers of debt.

A vote will take place on Tuesday that could cut the level of spending to 18% of the economy by 2021.

More

Will the ratings agencies wreck the Greek bailout

US debt: World waits on Democrat/Republican stand off

U.S credit rating downgrade threat

U.S government seeks to reassure markets

US: Shaun Richards blogs about latest data here.

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