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Standard & Poor’s Puts ‘Negative’ Outlook on U.S. AAA (1)
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By Robert Burgess


April 18 (Bloomberg) -- Standard & Poor’s put a “negative” outlook on
the U.S. AAA credit rating, citing 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 in a report today. “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.”

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.

Treasuries fell, reversing earlier gains, after S&P lowered its
outlook to negative from stable. The benchmark 10-year note yielded as
much as 3.45 percent in New York before trading little changed at 3.43
percent. The dollar dropped 0.7 percent to 82.58 yen and pared its
gain versus the euro. The S&P 500 Index fell 1.5 percent.

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.

Last week, Moody’s Investors Service said Obama’s plan to cut $4
trillion in cumulative deficits within 12 years may be a “positive”
for the nation’s credit quality and mark a reversal in the budget
debate.

The U.S. is the only large AAA rated country that saw its debt rise
during the crisis that until recently had no plan that would reverse
the trend, Steven Hess, senior credit officer at Moody’s, said last week