Moody’s Investors Service said late Friday that the United States should be able to keep its triple-A credit rating as long as Washington works out a deal that lets it continue to pay bondholders. The credit rating agency said it thinks that even if the nation’s $14.3 trillion borrowing limit isn’t raised by Tuesday’s deadline, the government would give priority to making interest payments on its debt and thereby avoid a default. Moody’s had warned July 13 that the country’s credit rating was in danger of being downgraded because of the stalemate in Congress over raising the debt limit.
In its statement Friday, however, Moody’s said that based on its current review it would likely rate the US debt as triple-A but with a negative outlook. That would mean that there is a possibility of a downgrade in the future. “If there were a default on a Treasury debt obligation, a downgrade would likely follow, even if the default were swiftly cured and investors suffered no permanent losses,” Moody’s said in its new report. Credit rating agencies assess the riskiness of debt issued by companies and governments.
The three major agencies — Moody’s, Standard & Poor’s and Fitch Ratings — have all raised warnings in recent months that they might downgrade the US government’s triple-A rating. Such a downgrade would send shockwaves through the financial system. The government has had the highest credit rating for nearly a century. That rating has allowed the United States to pay the lowest interest rates possible to finance Treasury debt.
