BUSINESS

Fitch Will Downgrade U.S. Rating If Treasury Notes Aren't Honored

06/08/2011 11:35 am ET | Updated Aug 08, 2011

NEW YORK (Walter Brandimarte, Daniel Bases and Burton Frierson) - The United States probably wouldn't be able to maintain its prized AAA sovereign ratings status if it suffered even a "technical" default on its debt, Fitch Ratings said on Wednesday.

The rating agency also warned it would downgrade the U.S. sovereign ratings to "restricted default" in August if the government fails to honor Treasury notes and some coupon payments on Treasury securities due on August 15.

"Even a so-called 'technical default' would suggest a crisis of 'governance' from a sovereign credit and rating perspective and though such an event (such as a short-lived Treasury bill default) may not permanently impair the capacity of the U.S. government to service its obligations, it is unlikely that its 'AAA' status would be retained in the short to medium term," Fitch said in a statement.

Fitch added, however, that it believes U.S. lawmakers will ultimately reach an agreement to raise the country's debt ceiling and avoid any default.

(Editing by James Dalgleish)

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