Moody's Places U.S. Aaa Rating on Review for Downgrade
Tweet
Share
E-mail
Stock futures dove after the close Wednesday as Moody's took the next step in its review of the United States’ coveted Aaa rating, placing its rating on review for a possible downgrade.
Dow futures are now down 77 and S&P 500 futures are down 8.50 following the news.
Moody's cited risk the debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations.
Financial institutions directly linked to the US government including Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks are also on review for possible downgrade.
If the U.S. fails to raise the debt limit promptly, it could led to a missed payment of interest or principal on outstanding bonds and notes, Moody’s notes.
Moody's thinks the probability of a default on interest payments is low but no longer "de minimis".
"An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate," the rating agency said. "However, because this type of default is expected to be short-lived, and the expected loss to holders of Treasury bonds would be minimal or non-existent, the rating would most likely be downgraded to somewhere in the Aa range."
Moody's said there is still hope for the U.S., saying if the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed.
Dow futures are now down 77 and S&P 500 futures are down 8.50 following the news.
Moody's cited risk the debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations.
Financial institutions directly linked to the US government including Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks are also on review for possible downgrade.
If the U.S. fails to raise the debt limit promptly, it could led to a missed payment of interest or principal on outstanding bonds and notes, Moody’s notes.
Moody's thinks the probability of a default on interest payments is low but no longer "de minimis".
"An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate," the rating agency said. "However, because this type of default is expected to be short-lived, and the expected loss to holders of Treasury bonds would be minimal or non-existent, the rating would most likely be downgraded to somewhere in the Aa range."
Moody's said there is still hope for the U.S., saying if the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Tenable Holdings, Inc. (TENB) to Join S&P SmallCap 600
- Google selects Rezolve Ai database platform for Google Cloud Web3
- Best Buy (BBY) PT Raised to $85 at Wedbush ahead of earnings
Create E-mail Alert Related Categories
Credit Ratings, Market CheckRelated Entities
Standard & Poor'sSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
