Following Fitch’s affirmation of ‘AAA’ rating to the U.S. debt, which was in sharp contrast to S&P’s downgrade, the focus now turns to whether Moody’s will retain top rating for the U.S.
Analysts at Societe Generale said that the potential for a downgrade from Moody’s may be further down the road given that current and future debt servicing levels of the U.S. look to be very sustainable, citing key metric employed by some ratings agencies, particularly Moody’s, to gauge whether or not a country is of AAA or AA quality.
“With the Fed announcing that it would keep its policy rate unchanged until at least mid-2013, the drop and anchoring of rate expectations should make it cheaper for the U.S. government to finance itself. This could help restrain some ratings agencies from downgrading the U.S. from AAA,” said the bank in a note.
Fitch Ratings confirmed triple-A rating for the U.S. on Tuesday, while also keeping the outlook as "stable".
"The key pillars of U.S.'s exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base," Fitch said.
S&P's on Aug. 5, lowered the long-term U.S. credit rating to AA+ from AAA, saying that in its opinion, a recently passed deficit cutting plan by the U.S. government fell short of the goal of stabilizing the government's medium-term debt dynamics.
A Merrill Lynch economist, Ethan Harris, wrote in a recent report that if Congress' deficit "super committee" does not come up with tax and entitlement reforms later this year, there's a chance that S&P could downgrade the national rating another notch to AA.
However, Moody's also warned last week that a downgrade could happen within the next two years if the U.S. doesn't address its deficit.
Having at least two of the three ratings agencies assigning a AAA rating to the U.S. is important, as some indexers have such a requirement in their investment mandates, Societe Generale said.