U.S. Credit Rating May be Downgraded

(Bloomberg) The U.S. may have its AAA credit rating cut by Standard & Poor’s Ratings Services, which said there is a growing risk of a policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.

The long-term rating may be lowered by one or more notches into the AA category in the next three months if S&P concludes Congress and President Barack Obama’s administration haven’t achieved a credible solution to the rising U.S. government debt burden and aren’t likely to achieve one in the foreseeable future, according to a statement today.

“Owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days,” S&P said.

The debt limit’s proximity has left investors unfazed, with the Treasury attracting higher-than-average demand for a third consecutive sale at an auction of 30-year bonds today. Benchmark 10-year note yields were at 2.97 percent at 11:23 a.m. in Tokyo, heading for a second consecutive weekly decline.

The dollar weakened against most major peers after S&P became the second ratings company this week to say it may downgrade the U.S. The dollar fell to $1.4184 per euro as of 11:24 a.m. in Tokyo from $1.4143 in New York. The currency was at 79.11 yen from 79.14 yen.

To read more about this story go to http://www.bloomberg.com/news/2011-07-15/u-s-debt-rating-may-be-cut-by-s-p-on-stalemate-over-plans-to-cut-deficit.html

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