Tags: Fitch | Debt-Limit | US | Rating

Fitch: Feb. 7 Debt-Limit Deadline Is Key to US Credit Rating

Monday, 13 January 2014 07:59 PM

Congressional resolution of the U.S. debt-limit suspension scheduled to end Feb. 7 is a “key date” for the nation’s AAA credit rating, according to Fitch Ratings.

President Barack Obama signed legislation last year to suspend the debt ceiling and end a 16-day partial government shutdown. Wrangling about lifting the borrowing limit “risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency,” Fitch said Oct. 15 in a statement when it placed the U.S.’s top ranking on rating watch negative.

“Feb. 7 is a key date for us,” James McCormack, managing director and global head of the sovereign and supranational group at Fitch, said today in an interview in New York. “That’s something we simply have to make a judgment about at the time.”

The previous debt-ceiling standoff ended Oct. 17, the day Treasury Secretary Jacob J. Lew had said the U.S. would exhaust its borrowing authority. Lew has warned Congress that the U.S. will run out of borrowing ability as soon as late February and has urged lawmakers to raise the debt ceiling weeks before then.

“That issue alone isn’t the only factor in the review of the rating,” McCormack said. “It’s how it’s resolved. In other words, is there enough of a time period once the debt limit is raised, such that it’s not a short-term concern hanging over the rating or the U.S. Treasury’s ability to fund itself on an ongoing basis?”

Regulatory Constraints

Fitch, which is a jointly owned subsidiary of Paris-based Fimalac SA and New York-based Hearst Corp., is registered with the European Securities and Markets Authority, a regulator that oversees the industry. Fitch has agreed to disclose a statement about the U.S. rating on March 21 as part of European rules, McCormack said.

The commitment “doesn’t necessarily mean we’re going to be in a position to resolve the rating watch,” McCormack said. “This is event-driven. We’ll see what happens with how the debt limit gets resolved and when.”

Standard & Poor’s stripped the U.S. of its top credit ranking on Aug. 5, 2011, on Washington gridlock and the lack of an agreement to contain its growing ratio of debt to gross domestic product. The U.S.’s ratio of public debt to GDP is forecast to fall to 74.6 percent in 2015 after peaking next year at 76.2 percent, according to a Congressional Budget Office forecast in May.

Moody’s Investors Service assigns the U.S. its top Aaa credit rating with a stable outlook. S&P changed its outlook last year to “stable” from “negative.”

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Congressional resolution of the U.S. debt-limit suspension scheduled to end Feb. 7 is a "key date" for the nation's AAA credit rating, according to Fitch Ratings.
Monday, 13 January 2014 07:59 PM
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