S&P threatens federal government with junk rating

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Standard & Poor’s would cut the U.S. credit rating to its lowest level and Moody’s Investors Service said it will probably reduce its ranking if the government fails to increase the debt limit, leading to a default.

S&P would lower its sovereign top-level AAA ranking to D, the last rung on its scale if the U.S. can’t pay its debt, John Chambers, chairman of the company’s sovereign rating committee, said today. Moody’s said it would probably assign a position in the Aa range, or within three steps of its highest level.

“If any government doesn’t pay its debt on time, the rating of that government goes to D,” Chambers said today in an interview with Erik Schatzker on Bloomberg Television’s “Inside Track”. “Having said that, we think the government will raise the debt ceiling. They’ve raised it 78 times more or less since 1960, often at the last moment, and we think that will be the case this time.”

Full story: S&P Would Lower U.S. Credit Rating to D on Failure to Increase Debt Limit – Bloomberg