Fitch Ratings affirmed its AAA credit rating for the US and said the outlook is stable, citing the nation’s central role in the global financial system and the flexible, diverse economy.
Fitch had put the rating under review after lawmakers reached a compromise August 2 on a debt-limit agreement that prevented a US default. Standard & Poor’s on August 5 cut its US credit rating to AA+ from AAA, saying lawmakers failed to cut spending enough to reduce record deficits. Moody’s Investors Service affirmed its top US ranking last week.
The US may be placed on negative outlook should its debt levels rise more than projected, indicating more than a 50 per cent probability that the nation will be downgraded in the next two years, Fitch said on Tuesday in a statement.
Since S&P, the New York-based subsidiary of McGraw-Hill Cos, downgraded the US, the yield on the 10-year treasury note, a benchmark for everything from home mortgages to car loans, has declined to as low as 2.03 per cent from a high this year of 3.77 per cent.
Treasuries are on pace in August for the biggest monthly gain since December 2008. Interest rates on American bonds are lower on Tuesday than on most of the countries with AAA ratings by S&P and the treasury recently financed its outstanding debt at the lowest cost ever.
Marketable US government debt outstanding has risen to $9.4 trillion from $4.34 trillion in mid-2007 as the government borrowed to bail out the nation’s banking system and lift the economy out of recession. The US went from budget surpluses averaging $139.7 billion from 1998 through 2001 to a deficit of $1.29 trillion last year, Bloomberg data show. That hasn’t raised the country’s borrowing costs. Average debt yields of 1.5 per cent in July compare with 6.54 per cent in 2000.
