clear
Sunday May 24th, 2015 5:23AM

Fitch puts US credit rating on negative watch

By The Associated Press
WASHINGTON - The Fitch credit rating agency has warned that it is reviewing the U.S. government's AAA credit rating for a possible downgrade, citing the impasse in Washington that has raised the threat of a default on the nation's debt.

Fitch placed the U.S. credit rating on negative watch Tuesday, a step that would precede an actual downgrade. The agency said it expects to conclude its review within six months.

The announcement comes as House and Senate leaders face a Thursday deadline to raise the nation's $16.7 trillion borrowing limit. Fitch says it expects the debt limit to be raised soon. But it adds, "the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default."

A Treasury Department spokesman said Fitch's announcement "reflects the urgency with which Congress should act to remove the threat of default hanging over the economy."

Dow Jones industrial futures were essentially unchanged Tuesday evening. Fitch made its announcement after financial markets had closed.

Lawmakers spent most of Tuesday trying to reach an agreement to lift the government's borrowing limit and avoid an eventual default. The limit is a cap on how much debt the government can accumulate to pay its bills. The government borrows in most years because its spending has long exceeded its revenue.

Fitch is one of the three leading U.S. credit ratings agencies, along with Standard & Poor's and Moody's Investors Service.

S&P downgraded U.S. long-term debt to "AA+" in August 2011. But three months ago, it raised its outlook. In part, that was because of tax increases and spending cuts that have helped shrink the budget deficit. S&P has said it's unlikely to change its rating because of the debt-limit fight.

Moody's said last week that even if Congress failed to raise the limit by Thursday, Treasury could make its interest payments ahead of other bills, "leaving its creditworthiness intact."

Fitch took a dimmer view Tuesday. It said Treasury might not be able to prioritize its interest payments. "It is unclear whether it even has the legal authority to do so," Fitch said.

A credit rating is an assessment of how able a country or company is to repay the money it's borrowed. A AAA rating lets companies and governments borrow at super-low rates.

So far, most investors have remained confident in U.S. debt, though rates have risen on short-term Treasury bills and shot up Tuesday as Congress' deadline neared. In a rare move, Fidelity Investments and JP Morgan Chase said last week they had purged their money market funds of all U.S. bills that come due soon after this week.

Still, rates have remained stable on longer-term debt, like the benchmark 10-year Treasury note. That shows that investors remain confident in longer-term Treasurys. The rate on the 10-year note is important because it affects rates on mortgages and many other loans.

After S&P downgraded long-term U.S. credit two years ago, investors sold stocks but continued to buy longer-term U.S. Treasurys.

Many analysts say that further downgrades to the U.S. credit rating would likely have little effect on bond investors. That's because Treasurys are the most transparent and widely traded security in the world. Credit rating agencies have little information to assess that isn't already available to most investors.

The U.S. government has never intentionally failed to pay its debts. That's why investors consider Treasurys the safest and most liquid investments in times of uncertainty. Treasurys are also denominated in dollars, the main currency used by central banks and financial institutions around the world.

Late Tuesday, House Republicans pushed for passage of legislation late Tuesday that would allow the Treasury to borrow normally until early February and end a 15-day partial government shutdown at least until Dec. 15.

While the House readied for a possible Tuesday night vote, the immediate result was to impose a daylong freeze on Senate negotiations on a bipartisan compromise.
© Copyright 2015 AccessNorthGa.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
S&P 500 index has its best year since 1997
The stock market closed out a record year with more all-time highs on Tuesday, giving U.S. indexes their biggest annual gains in almost two decades.
6:56PM ( 1 year ago )
Colorado readies for 'Green Wednesday' pot sales
Police were adding extra patrols around pot shops in eight Colorado towns that plan to allow recreational sales to anyone over 21 on Jan. 1.
1:52PM ( 1 year ago )
Kerry seeks framework for Mideast peace talks
A senior State Department official says Secretary of State John Kerry will try this week to get Israel and the Palestinians to agree on a framework for negotiating a final peace agreement, yet cautions against raising expectations for Kerry's latest round of shuttle diplomacy.
1:35PM ( 1 year ago )
U.S. News
Missing Ga. bank director arrested in Brunswick
A bank director accused of losing millions of investors' dollars before vanishing last year was arrested Tuesday during a traffic stop in a city in south Georgia.
7:00PM ( 1 year ago )
Amtrak to suspend some Crescent service in Jan., Feb.
Amtrak service will shut down in parts of the Southeast for several days in January and February for rail maintenance by Norfolk Southern Railway.
9:00AM ( 1 year ago )
Lung cancer scans urged for some smokers, not all
Certain current or former heavy smokers should start getting yearly scans for lung cancer to cut their risk of death from the nation's top cancer killer, government advisers said Monday - even as they stressed that the tests aren't for everyone.
7:26AM ( 1 year ago )
Business News
STATE CHAMPS: Buford sweeps Whitewater for AAAA title (VIDEO)
Buford won its first state baseball title since 2011 with a sweep of Whitewater Saturday in the Class AAAA championship series...
8:25AM ( 3 hours from now )
History and Heritage at Ft. Hollingsworth
North Georgia's sunny sky and comfortable temperatures brought out the visitors Saturday to the 20th Annual 'Day at the Fort' at Fort Hollingsworth, nestled in the rolling Banks County countryside near Alto.
7:34PM ( 9 hours ago )
Hall Co. fire officials warn residents to take caution around the grill during holiday weekend
It's Memorial Day Weekend, and safety is always a huge concern for families hitting the roads to travel.
By Alyson Shields
2:00PM ( 15 hours ago )
Wrigley, GDOL holds job fair for first wave of new employees
Earlier this month, the Wrigley Company announced plans to hire 150 new employees for its facility in Flowery Branch. Starting on Wednesday, May 27, the company will begin taking applications for some of those positions.
12:32PM ( 16 hours ago )
Duke Energy begins coal ash clean up; some material being moved to N. Ga.
Loads of coal ash from unlined dumps in North Carolina are being moved into Banks County.
By Associated Press
10:38AM ( 18 hours ago )