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Fitch Ratings – one of the biggest providers of credit ratings for debt – affirmed its pristine AAA rating for the United States of America Monday.
Getting the top rating from Fitch is a huge vote of confidence for the credit worthiness of the US of A. The U.S.’ longstanding gold-standard reputation as being “risk free” came into serious question in August 2011 when Standard & Poor’s took its rating on U.S. federal debt to AA+ from AAA. S&P is another of the biggest credit ratings agencies. S&P’s rating remains at AA+, one-notch below AAA.
Fitch didn’t just reaffirm the USA as a AAA credit, but also said the outlook is “stable.” That word is extremely important with bond investors who aren’t just concerned about a creditors current financial situation, but more importantly, how it looks in the future. Fitch put a “negative” outlook on U.S. debt in November 2011.
The strong dollar was a part of Fitch’s rating. “The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency,” according to the Fitch rating note.
Add to that – the federal government’s deficit is expected to fall in 2015 and 2016 from the 2.8% of gross domestic product last year, Fitch says.
Government debt is seen falling from 100% of GDP in 2014, Fitch says. Meanwhile, foreign demand for U.S. debt remains strong. Foreign holdings of U.S. Treasuries rose 10%, or $560 billion, since October 2013, Fitch says.
Fitch’s rating is stable – but risks remain. A big runup in deficits and debt would be a problem. And then there’s Congress … and the risk of a “deterioration in the coherence and credibility of economic policy making.”
And that could never happen, right?
