Another credit-rating downgrade for US? Less than 1 in 3 risk, says S&P. (+video)
Federal deficits are falling faster than expected, leading S&P to upgrade its economic outlook for the US. That's good news for the country's credit rating.
Americaâ€™s reputation as a creditworthy borrower just got a boost: Standard & Poorâ€™s said Monday that an improved federal budget position has reduced the likelihood of another credit-rating downgrade for the United States.
S&P officially changed its outlook on US Treasury debt from â€śnegativeâ€ť to â€śstable.â€ť
To translate the Wall Street lingo, that means the credit-rating agency doesnâ€™t see a big risk that it will have to lower its grade for Treasury bonds this year.
That doesnâ€™t mean everything is rosy for US finances, but itâ€™s a step of progress.
"The likelihood of a near-term downgrade of the rating is less than one in three,â€ť S&P said in its analysis, conducted by Nikola Swann and John Chambers. But the firm said the US has weaknesses that include its â€śfiscal performance, its debt burden, and the effectiveness of its fiscal policymaking.â€ť
In 2011, S&P took Americaâ€™s â€śsovereignâ€ť rating down a notch, changing Treasury debt from the highest rung to â€śAA+.â€ť That occurred at a time when uncertainty about fiscal policy had come into sharp relief â€“ with partisan debate raising the risk of a default on obligations as the Treasury ran into a Congress-imposed limit on federal borrowing.
Two other credit rating firms, Moodyâ€™s and Fitch, give US Treasuries a top rating but have a â€śnegativeâ€ť watch â€“ signaling the risk of a downgrade.
Credit ratings are a symbol of expert sentiment about whether the nation is keeping its fiscal house in order. The ratings are a potentially powerful signal to investors.
Some recent good news is that federal budget deficits are falling faster than many economists expected a few months ago. Thatâ€™s partly thanks to rising tax receipts in an improving economy.
S&P says it sees government debt â€śstaying broadly stable for the next few years,â€¦ [which] would allow policymakers some additional time to take steps to address pent-up age-related spending pressures.â€ť