Chicago, IL, United States (4E) – Fitch Ratings put the U.S.’s top AAA credit grade on rating watch negative, citing the government’s inability to raise its debt ceiling as the deadline set by the Treasury nears.
Fitch, the third biggest of the major debt-rating firms behind Standard & Poor’s and Moody’s Investors Service, placed U.S. Treasury bonds on Rating Watch Negative, which is sometimes considered the step before a downgrade.
The risk of a U.S. default is increased by the political brinkmanship and reduced financing flexibility, according to Fitch, which is a jointly owned by Hearst Corp. in New York and a Paris-based Fimalac SA subsidiary, in a statement released Wednesday.
The Chicago-based Fitch warned that after the Treasury Department’s emergency measures expire on Thursday, the government would have very little capacity to make payments on the $16.7tn national debt.
Treasury Secretary Jacob Lew has testified with Congress that the department has used extraordinary measures to avoid breaching the debt ceiling, and these measures will be exhausted after Oct. 17 and it will have around $30 billion to finance obligations.
Fitch thinks that the borrowing limit will still be lifted in time to prevent an unprecedented default. Fitch said it will likely resolve the U.S. debt’s rating watch negative outlook by the first quarter next year.