USA’s sovereign rating of AAA has been placed on ‘Rating Watch Negative’ by Fitch. It said that the debt ceiling brinksmanship “signal downside risks to U.S. creditworthiness”. While it expects a resolution to the debt limit before the x-date, risks continue to linger that the debt limit will not be raised or suspended by then. The US already hit its $31.4tn debt limit on 19 January 2023, post which the Treasury took extraordinary measures to avoid breaching the ceiling. Fitch said that prioritizing of debt securities over other due payments after the x-date would avoid a default.

In the event of a failure to pay their debt securities on time and in full, Fitch would downgrade the sovereign sovereign issuer default rating to Restricted Default (RD). The notes that are affected by the default will be cut to D and other long-term notes with payments due in the subsequent 30 days would likely be downgraded to CCC. Short-term T-Bills due within the following 30 days would likely be downgraded to C.

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