Fitch Ratings remains of the opinion that an agreement will be reached to raise the debt ceiling prior to Aug. 2 and that the U.S. government will make full and timely payment on all of its obligations. As previously stated by Fitch, in the unlikely event that the ceiling is not raised by Aug. 2
Fitch Ratings remains of the opinion that an agreement will be reached to raise the debt ceiling prior to Aug. 2 and that the U.S. government will make full and timely payment on all of its obligations. As previously stated by Fitch, in the unlikely event that the ceiling is not raised by Aug. 2 - the date that the Treasury Department predicts that the federal government's borrowing authority will be exhausted and it will not be able to securely meet all of its obligations - Fitch will place the U.S. sovereign rating on Rating Watch Negative.

Fitch has previously commented that a credible budget deficit reduction plan that would place public finances on a sustainable path over the medium to long term is necessary to underpin the 'AAA' status of the U.S. federal government. Fitch will conclude a review of the U.S. sovereign rating following resolution of the current debt ceiling impasse and in light of any agreement that is reached on reducing the federal budget deficit to a more sustainable level. Agreement on a credible fiscal consolidation strategy will secure the U.S. 'AAA' status; failure to do so will inevitably weaken the sovereign credit profile and may result in a sovereign rating downgrade.

In a report published today 'Rating Linkages to the U.S. Sovereign Rating' Fitch outlines potential credit and rating implications for sectors and entities in the event that the U.S. sovereign rating was to fall into the 'AA' category, as well as the remote scenario whereby the U.S. government missed a due payment on a Treasury security. The primary sectors discussed in the report are financial institutions, corporates, public finance and structured finance.

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