Visitors walk on the plaza at the U.S. Capitol in the midst of ongoing negotiations seeking a deal to raise the United States’ debt ceiling and avoid a catastrophic default, in Washington, U.S. May 24, 2023.
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Fitch put the United States’ AAA long-term foreign-currency issuer default rating on negative watch Wednesday evening, pointing to brinksmanship over the debt ceiling.
“The Rating Watch Negative reflects increased political partisanship that is hindering reaching a solution to raise or suspend the debt limit despite the fast-approaching x-date,” the rating agency said.
Futures linked to the Dow Jones Industrial Average briefly slipped about 100 points after Fitch, one of the big three ratings agencies, issued its note.
The so-called X-date, which is when the U.S. could default on its debt, could arrive as early as June 1, according to Treasury Secretary Janet Yellen.
Fitch noted that it still expects Washington officials to arrive at a resolution before the deadline.
“However, we believe risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the government could begin to miss payments on some of its obligations,” the rating agency said.
The announcement arrives after debt ceiling negotiations between teams representing President Joe Biden and House Speaker Kevin McCarthy have fallen short of an agreement.
On Wednesday, McCarthy said that discussions over raising the debt limit were progressing toward a deal, but both parties continue to clash over spending. McCarthy did offer hope that a deal would be reached before the deadline. But House members were informed their weeklong recess would begin on Thursday, although they were put on notice they could be called back for a vote.
