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DBRS eyes U.S. negatively
DBRS said it placed the United States of America’s long-term foreign- and local-currency issuer ratings of AAA under review with negative implications.
“The under review with negative implications reflects the risk of Congress failing to increase or suspend the debt ceiling in a timely manner. If Congress does not act, the U.S. federal government will not be able to pay all of its obligations. The precise timing of when the federal government will exhaust available cash and extraordinary measures, the so-called X-date, is somewhat unclear.
“However, Treasury Secretary Janet Yellen reiterated her warning on May 22 that the X-date could come as early as June 1. Judging from the latest data on daily net inflows into the Treasury general account, we believe it is reasonable to assume the X-date could arrive within weeks if not days,” DBRS said in a statement.
The agency, however, said it anticipates Congress will raise the debt limit to prevent a default.
“DBRS Morningstar would consider any missed payment of interest or principal as a default. In such a scenario, the relevant U.S. issuer ratings would be downgraded to “Selective Default,’” the agency warned.
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