Thursday, 30 May 2024
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U.S. Credit Ratings are Under Review for a Potential Downgrade

The AA ratings of U.S. long-term issuers and senior unsecured debt in local and international currencies are currently being reviewed by Scope Ratings, the top credit rating agency in Europe, for potential reduction.

The longer-term hazards connected to the improper use of the debt ceiling instrument are the basis for the evaluation. Other factors listed by Scope for the rating assessment include a rise in political polarisation, a split government since the November 2022 legislative elections, and larger fiscal deficits over the next years.

U.S. Credit Ratings

Scope claims that the US government has experienced varying degrees of difficulty in repaying its debt as a result of the ongoing debt ceiling issues. To guarantee that its debt is paid off in whole and on time, the government was depending on a last-minute congressional move.

Amid a political impasse between President Joe Biden’s Democrats and the Republican-controlled House of Representatives, the US government reached its $31.4 trillion borrowing cap in January. According to Treasury Secretary Janet Yellen, if Congress does not extend the debt ceiling, the United States may not have enough money to pay its debts as early as June 1.

  • The AA ratings of U.S. long-term issuers and senior unsecured debt are currently being reviewed by Scope Ratings.
  • US government has experienced varying degrees of difficulty in repaying its debt.
  • The second-highest sovereign rating from S&P Global is ‘AA+’ for the United States.

The U.S. House of Representatives, which is controlled by Republicans, enacted a plan last week that links an increase in the ceiling to $4.8 trillion in spending cutbacks. But Biden and his fellow Democrats are adamant that the cap should be raised by Congress without condition.

The United States has a triple-A rating from rating firms Moody’s and Fitch, the highest credit grade status they can grant a borrower. The US S-1+ short-term issuer ratings in local and foreign currencies have been placed on Scope’s watch list for downgrading.

The second-highest sovereign rating from S&P Global is ‘AA+’ for the United States. Despite the “tight-rope policy” between the administrative and legislative arms of government, S&P predicted that Congress would keep hiking or suspending the debt ceiling in its report published in March of last year.

To join Standard and Poor’s, Moody’s, Fitch, and DBRS as a recognized rating agency, Scope Ratings is in discussions with the European Central Bank.

It is unclear how the US government’s ongoing struggles to raise the debt ceiling would affect the nation’s credit ratings in the long run.

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