Moody’s, one of the world’s leading credit rating agencies, expects the U.S. government to continue to pay its debts on time. However, public statements from lawmakers during the debt ceiling negotiations could prompt a change in its assessments before a potential default. Moody’s currently has an “Aaa” rating for the U.S. government with a stable outlook, the highest creditworthiness evaluation Moody’s gives to borrowers.
Should the government reach the X-date without an agreement, Moody’s expects principal payments of maturing debt would not be at risk as the Treasury could auction new debt to refund old liabilities while remaining under the existing debt limit. However, interest payments would need to be prioritized to avoid a default.
Should a missed payment occur, Moody’s would downgrade the government by one notch, even in case of a brief default. Investors have to contend with this risk ahead of the June 1 deadline indicated by the U.S. Treasury to raise the government’s $31.4 debt ceiling, with Democrats and Republicans still deeply divided on how to curb the federal deficit.