Fitch Ratings late Tuesday made good on recent concerns about the U.S. credit profile and downgraded its rating on the nation’s debt one notch to AA+ from AAA.
Fitch Ratings late Tuesday made good on recent concerns about the U.S. credit profile and downgraded its rating on the nation’s debt one notch to AA+ from AAA, saying that it reflects “expected fiscal deterioration,” a “high and growing” government debt burden and an “erosion of governance” in face of repeated debt-limit standoffs and other ills.
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” it said. “Several economic shocks” as well as tax cuts and new spending initiatives “have contributed to successive debt increases over the last decade.” Treasury Secretary Janet Yellen said the downgrade was “arbitrary and based on outdated data,” in a statement Tuesday. She also said the decision “does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s preeminent safe and liquid asset, and that the American economy is fundamentally strong.”
Stock-market investors weren’t fazed by the warning back in June, but it remains to be seen how they will react when the market opens on Wednesday. The Dow Jones Industrial Average DJIA, +0.20% advanced 0.2% on Tuesday, while the S&P 500 index SPX, -0.27% lost 0.3%. Stock futures YM00, -0.23% ES00, -0.34% fell slightly, after the Fitch report and a third indictment against former President Donald Trump landed at about the same time late Tuesday.
U.S. borrowing costs have been climbing in recent months as the Treasury pays higher yields to issue bills to restock its coffers.
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