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Moody’s Says U.S. Faces Aaa Cut Without Budget Deal in 2013

Moody’s Investors Service said it may join Standard & Poor’s in downgrading the U.S.’s credit rating unless Congress next year reduces the percentage of debt- to-gross-domestic-product during budget negotiations.


The U.S. economy will probably tip into recession next year if lawmakers and President Barack Obama can’t break an impasse over the federal budget and if George W. Bush-era tax cuts expire in what’s become known as the “fiscal cliff,” according to a report by the nonpartisan Congressional Budget Office published on Aug. 22. The rating would likely be cut to Aa1 from Aaa if an agreement on the debt ratio isn’t reached, Moody’s said in a statement today.

Moody’s put the rating under review with a negative outlook in August 2011, when the U.S. pushed back a decision on spending and raised its so-called the debt ceiling after months of political wrangling. S&P cut its rating to AA+ that month, blaming the nation’s political process. Treasuries rallied as investors ignored the reduction, with the yield on the benchmark 10-year note since declining to record lows and drawing the ire of investors such as Warren Buffett, the biggest shareholder of Moody’s, who said after the S&P decision that the U.S. should be “quadruple-A.”

http://www.bloomberg.com/news/2012-09-11/u-s-rating-may-be-cut-by-moody-s-if-debt-to-gdp-not-reduced-1-.html