Fitch downgrades US long-term debt rating from to AA+ from AAA

[Commissar SFLUFAN]

Fitch downgrades U.S. long-term rating to AA+ from AAA

WWW.CNBC.COM

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The rating agency cited "expected fiscal deterioration over the next three years."

 

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Fitch Ratings downgraded the United States’ long-term foreign currency issuer default rating to AA+ from AAA on Tuesday, pointing to “expected fiscal deterioration over the next three years,” an erosion of governance and a growing general debt burden.

 

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” said Fitch.

 

 

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In May, the agency placed the nation’s AAA rating on negative watch, blaming the debt ceiling fight. At the time, lawmakers in Washington butted heads over an agreement that would keep the federal government from running out of money. President Joe Biden signed the debt ceiling bill on June 2, just days away from the “X-date” on June 5.

 

The country’s recent debt limit feud was mentioned again in Tuesday’s downgrade.

 

“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the ratings agency said.

 

Fitch also highlighted the rising general government deficit, which it anticipates will rise to 6.3% of gross domestic product in 2023, from 3.7% in 2022. “Cuts to non-defense discretionary spending (15% of total federal spending) as agreed in the Fiscal Responsibility Act offer only a modest improvement to the medium-term fiscal outlook,” Fitch said.

 

 

[Massdriver]

The market doesn’t care much. 

[Brian]

Boy these people can’t quit recession talk. 

[Commissar SFLUFAN]

1 hour ago, Massdriver said:

The market doesn’t care much. 

The market being down less than 1% means that it doesn't give a damn at all, nor do any significant economists, even those who are highly critical of the US's debt trajectory.

 

U.S. debt downgrade sinks global markets — but economists are not concerned

WWW.CNBC.COM

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Global stock markets tumbled on Wednesday after ratings agency Fitch downgraded the United States' long-term credit rating, but top economists say there is nothing to worry about.

 

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High-profile economists including former U.S. Treasury Secretary Larry Summers and Allianz Chief Economic Advisor Mohamed El-Erian lambasted the Fitch decision, with Summers calling it “bizarre and inept” and El-Erian “perplexed” by the timing and reasoning. Current Treasury Secretary Janet Yellen described the downgrade as “outdated.”

 

Goldman Sachs Chief Political Economist Alec Phillips was also quick to point out that the decision did not rely on new fiscal information and is therefore not expected to have a lasting impact on market sentiment beyond immediate shock selling on Wednesday.

 

Phillips said the downgrade “should have little direct impact on financial markets as it is unlikely there are major holders of Treasury securities who would be forced to sell based on the ratings change.”

 

“Fitch’s projections are similar to our own — they imply a federal deficit of around 6% of GDP over the next few years — and Fitch cites CBO (collateralized bond obligation) projections in its medium-term outlook, so the downgrade does not reflect new information or a major difference of opinion about the fiscal outlook,” he said in a note Tuesday.