NEW YORK, July 13 (UPI) -- The credit rating agency Moody's Investors Service said Wednesday it has put the U.S. government's Aaa bond rating on review for a possible downgrade.
In a statement posted on its Web site, Moody's said it took the step "given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on U.S. Treasury debt obligations."
Moody's had said July 2 a rating review would be likely in mid-July "unless there was meaningful progress in negotiations to raise the debt limit."
"In conjunction with this action, Moody's has placed on review for possible downgrade the Aaa ratings of financial institutions directly linked to the U.S. government: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks," the Wednesday statement said. "We have also placed on review for possible downgrade securities either guaranteed by, backed by collateral securities issued by, or otherwise directly linked to the U.S. government or the affected financial institutions."
Moody's said the review of the U.S. government bond rating resulted from "the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes. As such, there is a small but rising risk of a short-lived default."
"Moody's considers the probability of a default on interest payments to be low but no longer to be de minimis," the statement said. "An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate."
If there is a downgrade, Moody's said it would "most likely be … somewhere in the Aa range."
Another major credit rating agency, Standard & Poor's, has already said it will downgrade the U.S. government's credit rating if payments are missed, The Washington Post reported.
