Fitch has kept the US AAA rating on negative watch amid the country’s continuing debt ceiling impasse. The U.S. Treasury Department estimates it will run out of resources to meet fiscal obligations if the ceiling is not raised before June or is not raised.
In a statement, Fitch said it expects a deal before the estimated time frame for a possible default. However, the agency sees increasing risks of the US defaulting on some pledges.
The company says an eventual default would be a negative sign of management and inconsistent with the AAA rating. One of the suggested solutions is US President Joe Biden’s unilateral application of the 14th Amendment, which could also lead to a downgrade, as it is subject to legal challenges, Fitch said.
Failure to pay bonds on time will result in downgrading of IDR to “RD” and distressed bonds to D. Other bonds maturing in less than 30 days are downgraded to CCC, while T-bills of more than one month are downgraded. “C”.
The review comes amid talks between the government and Republicans, which have stalled in recent days in the face of opposition demands for spending cuts.
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