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by ForexNewsNow Team on July 14, 2011

Moody’s puts US rating on review for downgrade

On Wednesday, Moody’s decided to “place the Aaa bond rating of the government of the United States on review for a possible downgrade given the rising possibility that the statutory debt limit will not be raised on a timely basis. In conjunction, (the rating agency) placed on downgrade review the Aaa ratings of financial institutions directly linked to the US government.”

Moody’s is the first of the big-three rating agencies to place the United States on review for a downgrade. Nevertheless, “there is a small but rising risk of a short-lived default,” Moody’s said, adding that it considers the probability of a default to be low but no longer minimal.

If lowered, the rating would most likely be somewhere in the Aa range, the rating agency said.

– Jeffrey Goldstein, the U.S. Treasury’s under secretary for domestic finance, said in a statement that Moody’s assessment “is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country’s obligations and agree upon a substantial deficit-reduction package.”

– “They’ve been threatening this for a while and they’re just increasing the drumbeat. It’s time for our elected officials to do what they were elected to do. This was a warning shot across the bow. It means ‘deer in the headlights’ for the Treasury market. People don’t know what to do, especially in this market, where safety is a top concern. If you can’t hide in Treasuries, you don’t know where to hide. It’s just adding to uncertainty” declared Ward McCarthy, Chief financial economist for Jefferies & Co. in New York.

 

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