U.S. Likely to Retain AAA Rating... For Now

While a debt ceiling deal has been reached, a credit rating downgrade is still a real possibility. As ratings firms S&P and Moody's aren't saying what decision will be made, traders and investors are looking at their recent report for clues.

Here is what the two said in their respective "review for downgrade" reports:

S&P:

In its downgrade warning, S&P said a downgrade may occur even if a deal is reached on the debt ceiling. Here is how the firm lays out a downgrade or affirmation of the AAA rating:

• AFFIRM: If Congress and the Administration agree to raise the debt ceiling (with commensurate fiscal adjustments), we aim to review the details of such agreement within the next 90 days to determine whether, in our view, it is sufficient to stabilize the U.S.' medium-term debt dynamics. If we conclude that the agreement would likely achieve this end, all other things unchanged, we would expect to affirm both the long- and short-term ratings and assign a stable outlook.
  
  
• AFFIRM: If a debt ceiling agreement does not include a plan that seems likely to us to credibly stabilize the U.S.' medium-term debt dynamics but the result of the debt ceiling negotiations leads us to believe that such a plan could be negotiated within a few months, all other things unchanged, we expect to affirm both the long- and short-term ratings and assign a negative outlook, pending review of the eventual plan.
  
  
• DOWNGRADE: If such an agreement is reached, but we do not believe that it likely will stabilize the U.S.' debt dynamics, we, again all other things unchanged, would expect to lower the long-term 'AAA' rating, affirm the 'A-1+' short-term rating, and assign a negative outlook on the long-term rating.

Moody's:

Moody's simply said: "If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed."

Based on the above data it looks like the AAA credit rating will be retained for the time-being. What the case will be 3-6 months from now remains to be seen...

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Meritage Homes (MTH) Reiterated at Market Outperform by Citizens as Stock Up 24% YTD
• Trump's $1.2 billion D.C. spending spree fans fiscal fears as yields surge
• Meritage Homes (MTH) Reiterated at Market Outperform by Citizens