Standard & Poor’s Puts ‘Negative’ Outlook on U.S. AAA (2)

[DRSB]

Standard & Poor’s Puts ‘Negative’ Outlook on U.S. AAA (2)

"April 18 (Bloomberg) -- Standard & Poor’s put a “negative” outlook on the AAA credit rating of the U.S., citing a “material risk” the nation’s leaders will fail to deal with rising budget deficits and debt.

“We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013,” New York-based S&P said today in a report. “If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”
Longer-term Treasuries fell, reversing earlier gains, after S&P lowered its outlook to negative from stable. The cost to protect against a default by the government and the nation’s banks jumped and stocks declined after the New York-based ratings firm’s action, which assigns a one-in-three chance that it will lower the U.S. rating in the next two years.

Under President Barack Obama’s fiscal year 2012 budget, released in February, the total debt subject to the ceiling would be $20.8 trillion in 2016. The plan House Republicans approved April 15, written by Budget Committee Chairman Paul Ryan, would need a debt ceiling of at least $19.5 trillion, according to data compiled by Bloomberg Government.

The Treasury Department projected that the government may reach the $14.3 trillion debt ceiling limit as soon as mid-May and run out of options for avoiding default by early July."