U.S. debt enjoys a top-notch AAA rating from Fitch but that might not last forever.
The ratings agency affirmed the AAA rating with a stable outlook in August after the debt-ceiling impasse, but warned that changes may come if a congressional supercommittee failed to find ways to cut spending by a Nov. 23 deadline.
The supercommittee did fail in its task to shave $1.2 trillion from the nation's deficits, and Fitch was quick to remind the government of its August warning.
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"In Fitch's Aug. 16 statement, when it affirmed the U.S. AAA sovereign ratings with a stable outlook, the agency commented that it would update its U.S. economic and fiscal projections in light of the work of the supercommittee. Fitch also commented that failure by the supercommittee to reach agreement would likely result in a negative rating action — most likely a revision of the rating outlook to negative, which would indicate a greater than 50 percent chance of a downgrade over a two-year horizon," the agency says in a statement.
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"The announcement that the supercommittee was unable to reach agreement on at least $1.2 trillion of deficit-reduction measures underscores the challenge of securing the political consensus on how to reduce the federal budget deficit and place U.S. public finances on a sustainable path over the medium-term," the agency said.
"Fitch now expects to conclude its review of the U.S. sovereign rating by the end of November."
Markets are set to punish government spending regardless of what ratings agencies do.
"Investors look right through the agencies," Greg Peters, global head of fixed-income research at Morgan Stanley, tells Bloomberg.
"They’re going to invest how they see fit."
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