The smaller ratings agency, DBRS, is considering downgrading the AAA-rating of the US.
• Action reflects the growing risk of a selective default by the federal government on its debt securities
• If the debt ceiling is not raised or eliminated by October 17, it is unclear how the Treasury would operate
• While a low probability, missing payments on selected government securities cannot be ruled out the longer it takes for an agreement to be reached on the debt ceiling, the greater the risk of missed payments
• The review for downgrade reflects the increasing uncertainty over the debt ceiling outcome
• If by October 17 there is still no agreement to raise the debt ceiling and the United States subsequently misses a debt payment, DBRS would assign a Selective Default rating to the affected securities
• If there is a full-fledged default involving a wide array of securities, the magnitude of the downgrade would be greater
• My guess is that Fitch could do the same on Thursday or Friday. This is being largely ignored but Fitch doing the same could create much bigger ripples in markets.
• Action reflects the growing risk of a selective default by the federal government on its debt securities
• If the debt ceiling is not raised or eliminated by October 17, it is unclear how the Treasury would operate
• While a low probability, missing payments on selected government securities cannot be ruled out the longer it takes for an agreement to be reached on the debt ceiling, the greater the risk of missed payments
• The review for downgrade reflects the increasing uncertainty over the debt ceiling outcome
• If by October 17 there is still no agreement to raise the debt ceiling and the United States subsequently misses a debt payment, DBRS would assign a Selective Default rating to the affected securities
• If there is a full-fledged default involving a wide array of securities, the magnitude of the downgrade would be greater
• My guess is that Fitch could do the same on Thursday or Friday. This is being largely ignored but Fitch doing the same could create much bigger ripples in markets.