Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Global Credit Research - 02 Aug 2011
New York, August 02, 2011 -- Moody's Investors Service has confirmed the Aaa government bond
rating of the United States following the raising of the statutory debt
limit on August 2. The rating outlook is now negative.
Moody's placed the rating on review for possible downgrade on July
13 due to the small but rising probability of a default on the government's
debt obligations because of a failure to increase the debt limit.
The initial increase of the debt limit by $900 billion and the
commitment to raise it by a further $1.2-1.5
trillion by yearend have virtually eliminated the risk of such a default,
prompting the confirmation of the rating at Aaa.
In confirming the Aaa rating, Moody's also recognized that
today's agreement is a first step toward achieving the long-term
fiscal consolidation needed to maintain the US government debt metrics
within Aaa parameters over the long run. The legislation calls
for $917 billion in specific spending cuts over the next decade
and established a congressional committee charged with making recommendations
for achieving a further $1.5 trillion in deficit reduction
over the same time period. In the absence of the committee reaching
an agreement, automatic spending cuts of $1.2 trillion
would become effective.
In assigning a negative outlook to the rating, Moody's indicated,
however, that there would be a risk of downgrade if (1) there is
a weakening in fiscal discipline in the coming year; (2) further
fiscal consolidation measures are not adopted in 2013; (3) the economic
outlook deteriorates significantly; or (4) there is an appreciable
rise in the US government's funding costs over and above what is
First, while the combination of the congressional committee process
and automatic triggers provides a mechanism to induce fiscal discipline,
this framework is untested. Attempts at fiscal rules in the past
have not always stood the test of time. Therefore, should
the new mechanism put in place by the Budget Control Act prove ineffective,
this could affect the rating negatively. Moody's baseline
scenario assumes that fiscal discipline is maintained in 2012, despite
pressures for fiscal relaxation that often precede general elections and
the difficult negotiations that are likely to arise due to the scheduled
expiration of the so-called "Bush tax cuts" at the
end of that year.
Second, further measures will likely be required to ensure that
the long-run fiscal trajectory remains compatible with a Aaa rating.
Specifically, Moody's expects to see a stabilization of the
federal government's debt-to-GDP ratio not too far
above its projected 2012 level of 73% by the middle of the decade,
followed by a decline. Such a pattern would also support a smaller
interest burden as a percentage of government revenues than is now projected.
Wide political differences that have characterized the recent debt and
fiscal debate, if they continue, could prevent effective policymaking
around that time. Measures that further reduce long-term
deficits would be positive for the rating; a lack of such measures
would be negative.
Third, recent downward revisions of economic growth rates and the
very low growth rate recorded in the first half of 2011 call into question
the strength of potential growth in the coming year or two. Continued
very low growth would make fiscal consolidation more difficult.
As a result, Moody's will also be monitoring the pace of growth
as it relates to the fiscal effort.
Finally, the US Treasury's cost of borrowing has remained
low despite the recent political uncertainties surrounding the debt limit
and the long-term fiscal outlook. While Moody's and
economic forecasters generally expect interest rates to rise over the
next few years, a rise in borrowing costs above and beyond what
is now expected would threaten efforts at fiscal consolidation.
Such a development would also be negative for the rating should it occur.
Moody's has also confirmed the Aaa ratings of certain US government-guaranteed
bonds issued by the governments of Israel and Egypt, which had been
on review for possible downgrade as a result of the review of the US government's
The implications of this rating action for directly and indirectly related
ratings will be reported presently through a separate press release.
Moody's previously discussed the review of the US government's rating
and directly related credits in multiple documents that can be found on:
For a complete list of affected securities and additional analysis,
please visit: www.moodys.com/USRatingActions.
Please see the rating methodologies tab on the Credit Policy page on moodys.com
for the relevant methodology for each action.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last Credit Rating Action and the rating history
Steven A. Hess
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service, Inc.
MD - Sovereign Risk
Sovereign Risk Group
Moody's Investors Service, Inc.
Moody's Investors Service, Inc.
Moody's confirms US Aaa Rating, assigns negative outlook
250 Greenwich Street
New York, NY 10007
No Related Data.
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY’S (“MOODY’S PUBLICATIONS”) MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for “retail clients” to make any investment decision based on MOODY’S credit rating. If in doubt you should contact your financial or other professional adviser.
For Japan only: MOODY'S Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of MOODY'S Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.