A new report from Fitch Ratings looks at the simulated effects of a hypothetical ‘double dip’ recession in the US on the global economic recovery, where US growth falls to 1% in 2011, negative 0.6% in 2012, and 1.5% in 2013.
Under the hypothetical US double dip scenario, world GDP would be a minimum 2.1 percentage points (pp) lower compared with Fitch’s baseline scenario on a cumulative basis for 2011-2013.
World GDP growth would be 0.3pp lower than the baseline in 2011, 1.2pp lower in 2012 and 0.7pp lower in 2013.
At the same time, a subsequent contraction in global oil demand would lead to a decline in oil prices to around USD90/barrel in 2012 and USD85/barrel in 2013, against Fitch’s baseline projection of USD100/barrel for 2012 and 2013.
Overall, small and open emerging Asian economies with extensive trade links to the US and China would suffer the steepest declines in output in the ‘double dip’ scenario.
The full report, What if the US Falls Back into Recession? is available at the Alacra Store.
When they are wrong about quarterly earnings forecasts, analysts may stubbornly stick to their erroneous views, a tendency that might contribute to market bubbles and busts, according to research coauthored by John Beshears of the Stanford Graduate School of Business.
People become overcommitted to a previous course of action. Psychological factors like this play an important role in how people form expectations about the future.
Among the specific findings:
- As analysts got more and more extreme, or “out-of-consensus,” they became less and less responsive to the new earnings information when revising their full-year forecasts.
- Stubbornness hurts forecasting accuracy. Revised full-year forecasts from extreme incorrect analysts were further off the mark from actual earnings than they would have been had the analysts’ updating behavior been like the behavior of analysts who started at the consensus point.
- Analysts are punished for stubbornness. The more extreme, incorrect, and stubborn an analyst was, the less likely that he or she would rank among Institutional Investor magazine’s “All-American” list of top analysts.
Fitch Ratings has affirmed the United States (US) Long-term foreign and local currency Issuer Default Ratings (IDRs) and Fitch-rated US Treasury security ratings at ‘AAA’. Fitch has simultaneously affirmed the US Country Ceiling at ‘AAA’ and the Short-term foreign currency rating at ‘F1+’. The Outlook on the Long-term ratings is Stable.
The affirmation of the US ‘AAA’ sovereign rating reflects the fact that the key pillars of US’s exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base. Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to ’shocks’.
Fitch will review its fiscal projections in light of the outcome of the deliberations of the Joint Select committee (due by end November) as well as its near and medium-term economic outlook for the US by the end of the year. An upward revision to Fitch’s medium to long-term projections for public debt either as a result of weaker than expected economic recovery or the failure of the Joint Select Committee to reach agreement on at least USD1.2trn of deficit-reduction measures would likely result in negative rating action. The rating action would most likely be a revision of the rating Outlook to Negative, which would indicate a greater than 50% chance of a downgrade over a two-year horizon. Less likely would be a one-notch downgrade.
US sovereign liabilities, both the dollar and Treasury securities, remain the global benchmark and accordingly the US credit profile benefits from unparalleled financing flexibility and enhanced debt tolerance, even relative to other large ‘AAA’-rated sovereigns. The US dollar’s status as the pre-eminent global reserve currency and depth of the US Treasury market render financing risks minimal and underpin a low cost of fiscal funding.
The US economy remains one of the most productive in the world, reflected in levels of income per head that are substantially higher than the ‘AAA’ median and other major ‘AAA’ sovereigns. The institutional, legal and financial infrastructure supports business growth and innovation and Fitch continues to forecast that the US economy (and tax base) will, over the medium term, be one of the most dynamic amongst its high-grade and ‘AAA’ peers and support the stabilisation and eventual reduction in government indebtedness. Fitch’s current assessment is that the US economic recovery will regain momentum and that a period of above trend growth will subsequently be followed by growth of at least 2.25% over the long term.
As underscored by the challenges facing some European governments in securing investor confidence in their long-run solvency, the gap between government cost of borrowing and economic growth – the interest rate-growth differential (IRGD) – is crucial. For the US, the IRGD has historically been more favourable than that faced by its high-grade and ‘AAA’ peers. Fitch expects this to continue over the medium term as low nominal and real interest rates persist, underpinned by the US’s dollar’s continued pre-eminence as the global reserve currency and Fitch’s assessment of medium-term growth prospects relative to peers.
Despite its exceptional creditworthiness, the fiscal profile of the US government has deteriorated sharply and is set to become an outlier relative to ‘AAA’ peers. The overall level of general government debt, which includes debt incurred by states and local governments, is estimated by Fitch to reach 94% of GDP this year, the highest amongst ‘AAA’ sovereigns. However, federal government indebtedness is lower than in other major ‘AAA’-rated central governments. Fitch estimates that federal debt held by the public will be equivalent to approximately 70% of GDP this year compared to around 75% for the UK (’AAA’) and France (’AAA’).
Fitch’s analysis of the Budget Control Act (BCA 2011) passed into law on August 2 implies USD4.1trn of deficit reduction over the ten years to 2021 relative to the Congressional Budget Office (CBO) ‘alternative fiscal scenario’ and Fitch’s previous basecase projections and, if fully implemented, would bring US public finances materially closer to a sustainable path. Because the BCA 2011 sets absolute caps on discretionary spending relative to the CBO March 2011 baseline, the overall level of savings on discretionary spending relative to the CBO’s alternative fiscal scenario (ie. the ‘current or no policy change’ scenario) is USD2.9trn. Combined with the USD1.2trn of spending cuts implied by automatic across-the-board spending cuts (’sequestration’) in the event that the Joint Select Committee does not reach agreement, the BCA 2011 implies at least USD4.1trn of deficit reduction relative to the CBO’s ‘alternative fiscal scenario’.
The BCA 2011 has tasked a bi-partisan Congressional Joint Select Committee to agree USD1.5trn of deficit-reduction measures by end-November 2011. In the event that the joint committee fails to secure a majority agreement on deficit reduction measures of at least USD1.2trn that could be enacted by January 15 2012, the Act stipulates automatic across-the-board cuts to spending split evenly between security and non-security programs beginning in FY2013. The automatic cuts would be targeted to reduce the deficit by USD1.2trn over the nine years to FY2021. Social Security, Medicaid and unemployment insurance programs would be exempt from ’sequestration’ and revenue measures are not part of this ‘enforcement mechanism’. However, the ’sequestration’ would only come into effect from January 2013 and could be over-turned by the existing or future Congress and Administration.
Fitch currently projects federal debt held by the public and gross general government debt stabilising in the latter half of the decade at 85% and 105% of GDP, respectively, higher than for any other currently ‘AAA’-rated sovereign. In Fitch’s opinion, this is at the limit of the level of government indebtedness that would be consistent with the US retaining its ‘AAA’ status despite its underlying strengths. Higher levels of indebtedness would limit the scope for counter-cyclical fiscal policies and the US government’s ability to respond to future economic and financial crises.
Fitch’s latest medium-term fiscal projections detailed in an accompanying Special Report, ‘US Public Finances – Overview and Outlook’, reflect the judgement that the emerging public and political recognition of the necessity of fiscal consolidation will be translated into specific and timely measures that will gradually reduce the budget deficit and place US public finances on a sustainable path. In this regard, the extent to which the Joint Select Committee is able to secure agreement on deficit-reduction will provide further information on the risks around this judgement.
The BCA 2011 also authorised an immediate USD400bn increase in the debt ceiling and established procedures for at least a further USD1.7trn that would raise the ceiling to USD16.394trn which would be sufficient to fund the federal government through 2012. In Fitch’s opinion, the debt ceiling is an ineffective and damaging mechanism for enforcing fiscal discipline. It does not prevent budget decisions that will incur future debt issuance in excess of the ceiling, while ‘last minute’ agreements to raise it undermine confidence in the sovereign’s ‘willingness to pay’.
Agreement and passage into law of a credible set of deficit-reduction measures of at least USD1.2trn by end-2011 would be consistent with Fitch’s own fiscal projections and demonstrate that a sufficiently broad-based political consensus can be forged on how to reduce the budget deficit and provide a platform for the additional measures that will be required over the medium to long term. In the event that the Joint Select Committee is unable to reach an agreement that can secure support from Congress and the Administration, Fitch would be less confident that credible and timely deficit-reduction strategy necessary to underpin the US ‘AAA’ sovereign rating and Stable Outlook will be forthcoming despite the USD1.2trn of automatic cuts that would follow.
Fitch’s latest US fiscal projections are set out in detail in a Special Report, US Public Finances – Review and Outlook.
Excerpts from US Sovereign Rating Downgrade Has Knock-On Effects For Some Borrowers
In light of Standard & Poor’s Ratings Services downgrade of the rating on the United States of America, we have lowered the ratings on a number of entities and debt issues whose creditworthiness is directly or indirectly linked to, or heavily dependent on, the credit quality of the sovereign.
While we don’t view sovereign ratings as ceilings for other entities, sovereign credit risk is a key consideration in our assessment of nonsovereign ratings because the wide-ranging powers and resources of a national government can affect the financial, operating, and investment environments of entities under its jurisdiction. Standard & Poor’s issuance of a rating higher than the sovereign reflects our view of an entity’s willingness and ability to pay its debt as superior to that of the sovereign. Moreover, it reflects our view that if the sovereign does default, there is an appreciable likelihood that the entity or its debt won’t follow suit.
History shows that a sovereign default can directly result in defaults by related borrowers, as can the deterioration in the economic and operating environment that is typically associated with a sovereign default. Therefore, our lowering of the U.S. sovereign rating to ‘AA+’ from ‘AAA’ has had a number of knock-on effects.
This report summarizes those effects in the following areas:
- Government-Related Enterprises
- Public Finance Debt
- State and Local Governments
- Banks and Insurers
- Structured Finance
- Nonfinancial Corporate Borrowers
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Ratings On Bonds Backed By Federal Leases Lowered To ‘AA+’ Upon U.S. Downgrade
The lower ratings on the bonds reflect our view that the lease rental payments supporting the various bonds, while subject to appropriation, are backed by the full faith and credit of the U.S.
Ratings On Certain Public Finance Debt Issues With FHA Mortgage Guarantees Are Placed On Watch Negative After U.S. Downgrade
FHA guarantees cover nearly all the losses from loans that have defaulted, with FHA assuming the risk of recouping its expenses through the sale of the foreclosed property. The issuer, through the loan servicer, receives the claim from FHA for the outstanding balance of the loan and other expenses from FHA, but has no claim to the sale proceeds. Therefore in the foreclosure process on an FHA loan the issuer’s entire exposure is exclusively to FHA.
Certain Public Housing Authority Government-Related Entity Ratings Lowered
We believe there is a moderate likelihood that public housing authorities would benefit from government support in the event of an extraordinary circumstance. Nonetheless, in our view the lower U.S. sovereign rating no longer supports a one-notch upgrade of the stand-alone credit profile for these affected ratings.
Ratings On Certain Municipal Housing Issues Lowered To ‘AA+’
In our view, the credit strength of these bonds is basedsolely on the guarantee of FHA and, as such, will reflect the ratings of the U.S. government of which the FHA is an agency.
Ratings On Municipal Housing Issues Backed By The U.S. Government Are Lowered To ‘AA+’
The ‘AA+’ rating on the affected debt issues is based on our view of MBS enhancements that make mortgage payments in the event of a mortgage default. In the cases of the affected issues, the enhancement is irrevocable and is in place until bond maturity. Payment on the MBS enhancements provided by Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corp. (Freddie Mac) are guaranteed by those entities. The ratings on those
issues reflect our view of the support likely to be provided by the U.S. government. Payment on the MBS enhancements backed by Governmental National Mortgage Association (Ginnie Mae) is backed by the full faith and credit of
the government, and the ratings on those issues reflect the rating of the U.S. government.
Ratings On U.S. Municipal Housing Issues Guaranteed By Fannie Mae And Freddie Mac Lowered To ‘AA+’
The rating on the affected debt issues is based on the rating on either Fannie Mae or Freddie Mac, which either guarantees direct payment on the bonds, or in some circumstances, guarantees mortgage payments in the event of a mortgage default. In the cases of the affected issues, the guarantee is irrevocable and is in place until bond maturity. As such, the bonds carry the rating on Fannie Mae or Freddie Mac.
Credit FAQ: Understanding Ratings Above The Sovereign
The number of sovereign rating actions taken by Standard & Poor’s Ratings Services over the past several months has led to heightened interest in our approach to issuing ratings that are above the sovereign’s for government-related entities, banks, insurers, corporations, state, regional, or local governments, and securitizations. Investors have asked for clarification on our methodologies and examples of how we put them into practice. So it seems appropriate to summarize the criteria we’ve published on the topic, and to answer the questions we receive most frequently from market participants.
U.S. Bank Ratings Are Unaffected By The Downgrade Of The Sovereign
None of the banks we rate in the U.S. has an issuer credit rating higher than the U.S. sovereign rating. The sovereign downgrade does not alter the government support assumptions that we factor into our ratings on four banks.
U.S. Downgrade Doesn’t Currently Affect Top-Rated U.S. Nonfinancial Corporate Borrowers
The sovereign downgrade will not affect the ratings or stable rating outlooks on the six U.S.-domiciled highest-rated nonfinancial corporate issuers: Automatic Data Processing Inc. (ADP; AAA/Stable/A-1+), ExxonMobil Corp. (AAA/Stable/A-1+), Johnson & Johnson (AAA/Stable/A-1+), Microsoft Corp. (AAA/Stable/A-1+),General Electric Co. (AA+/Stable/A-1+), and W.W. Grainger Inc. (AA+/Stable/A-1+).
Ratings On Structured Finance Transactions Remain On CreditWatch Negative Following U.S. Sovereign Downgrade
Standard & Poor’s Ratings Services today stated that its ratings on 744 structured finance transactions (the affected transactions) remain on CreditWatch negative following the loweringof the long-term credit rating on the United States of America to ‘AA+’ with anegative outlook from ‘AAA’ and the removal of the long-term and short-termratings from CreditWatch negative.
List of 744 Structured Finance Ratings On CreditWatch Negative Following U.S. Sovereign Downgrade
S&P Lowers Ratings On Defeased Bonds Following U.S. Downgrade
State And Local Government Ratings Are Not Directly Constrained By That Of The U.S. Sovereign
Excerpted from State And Local Government Ratings Are Not Directly Constrained By That Of The U.S. Sovereign
Standard & Poor’s Ratings Services’ downgrade of the U.S. sovereign debt rating to AA+/Negative/A-1+, we may still assign a ‘AAA’ rating to some state and local governments.
We do not directly link our ratings on U.S. state and local governments to that of the U.S. sovereign debt rating for reasons outlined in our criteria. However, we recognize generally that U.S. state and local governments’economic performance is frequently similar to the nation and they share responsibility for some spending items with the federal government. Yet individual state and local governments’ funding interdependencies with the federal government vary considerably.
A minority of state and local obligors rated by Standard & Poor’s have achieved the highest long-term rating of ‘AAA’. We expect that many of these obligors, particularly those with relatively low levels of funding interdependencies with the federal government or those that, in our view, are likely to manage declines in federal funding without weakening their credit profile, should be able to retain ratings above the U.S. sovereign rating if we would otherwise assign ratings above the U.S. sovereign rating based on our view of other rating factors.
However, in light of the potential for common economic and credit environments between the U.S. and state and local governments, we expect that in most instances in which state and local governments have ratings above that of the U.S., the differential will be limited to one notch.
Our credit rating criteria allow for a higher rating on a state or local government than on the sovereign if, in our view, the state or local government demonstrates the following characteristics:
- The ability to maintain stronger credit characteristics than the sovereign in a stress scenario,
- An institutional framework that is predictable and that is likely to limit the risk of negative sovereign intervention, and
- The projected ability to mitigate negative sovereign intervention by a high degree of financial flexibility and independent treasury management.
Pursuant to our criteria, the fiscal autonomy, political independence, and generally strong credit cultures of U.S state and local governments can support ratings above that of the U.S. sovereign.
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United States of America Long-Term Rating Lowered To ‘AA+’ On Political Risks And Rising Debt Burden; Outlook Negative
The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what would be necessary to stabilize the government’s medium-term debt dynamics. More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.
Ratings On The U.S. Central Securities Depository And Three Clearinghouses Lowered Following U.S. Sovereign Downgrade
The rating actions on DTC, FICC, NSCC, and OCC follow the lowering of the long-term sovereign credit rating on the U.S. The downgrades of these four financial institutions are not the result of any company-specific event. We have not changed our view of the fundamental soundness of their depository or clearing operations. Rather, the downgrades incorporate potential incremental shifts in the macroeconomic environment and the long-term stability of the U.S. capital markets as a consequence of the decline in the creditworthiness of the federal government.
Ratings On Select GREs And FDIC- And NCUA-Guaranteed Debt Lowered After Sovereign Downgrade
The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government. The downgrades of 10 of the 12 Federal Home Loan Banks (FHLBs) and the FHLB System’s senior debt reflect a one-notch reduction in the U.S. sovereign rating. Before we downgraded the U.S., under our GRE criteria, 10 of the 12 FHLB banks were rated ‘AAA’.
Asia-Pacific Sovereigns Are Not Immediately Affected By The U.S. Downgrade, But Long-Term Consequences Could Be Negative
In and of itself, there is no immediate impact on Asia-Pacific sovereign ratings resulting from the lowering of the issuer credit ratings on the U.S. to ‘AA+’. However, the U.S. rating change, together with the weakening sovereign creditworthiness in Europe, does point to an increasingly uncertain and challenging environment ahead. Uncertainties in the global financial market and weakened prospects in the developed economies have further undermined confidence. The potential longer-term consequences of a weaker financing environment, slower growth, and higher risk aversion are negative factors for Asia-Pacific sovereign ratings.
U.S. Downgrade Has No Immediate Impact On Asia-Pacific Ratings
In and of itself, there is no immediate impact on Asia-Pacific corporate, financial institutions, project finance, or structured finance ratings resulting from the lowering of the issuer credit rating on the U.S. to ‘AA+’. However, the U.S. rating change, together with the weakening sovereign creditworthiness in Europe, does point to dampened market sentiment, potential rising funding costs in offshore markets, and reduction/reversal of capital flows. Mitigating factors for the region include a still-positive economic growth outlook for Asia Pacific, together with generally strong domestic saving rates and healthy household and corporate sectors.
U.S. Guaranteed Sovereign Bonds Issued By Israel Are Lowered To ‘AA+’; Israel’s ‘A’ Sovereign Rating Is Unaffected
Standard & Poor’s Ratings Services lowered the ratings on all U.S.-guaranteed sovereign bonds issued by the State of Israel to ‘AA+’ from ‘AAA’. This rating action is in line with the rating action on the United States of America that took place on Aug. 5, 2011. The sovereign credit ratings on Israel remain unchanged at ‘A/A-1′.
Lowered U.S. Sovereign Rating Has No Effect On ‘AAA’ Rating For Johnson & Johnson
Our lowering of the U.S. sovereign rating to AA+/Negative/A-1+ will not affect our AAA/Stable/A-1+ rating on Johnson & Johnson. As a general matter, a change in the credit rating or outlook on a sovereign issuer does not necessarily lead to a change in the rating or outlook on other similarly rated nonfinancial corporate issuers in that country. The premier ratings on J&J reflect our expectation that, over the next two years, revenue growth will be in the low- to mid-single digits, with operating margins remaining above 30%.
Principal Stability Fund Ratings Unaffected By U.S. Sovereign Downgrade
The funds to which we assigned principal stability fund ratings (PSFRs) are unaffected by the lowering of the long-term rating on the United States of America to ‘AA+’. Funds with PSFRs seek to maintain a stable or accumulating net asset value. PSFRs are closely linked to the short-term ratings on the U.S. government because for a fund to be eligible for an investment-grade rating, all investments must carry a Standard & Poor’s short-term rating of ‘A-1+’ or ‘A-1′. Because we affirmed the ‘A-1+’ short-term rating on the U.S., the lowering of the long-term rating does not directly affect the ratings on these funds; the credit quality of the U.S. still meets the credit quality standards for all PSFR categories.
Oxford Analytica has more confidence than S&P in the ability of the US government to address the country’s debt problem and expects tax reform to be a significant component. OxAn adds that while initial market reaction to S&P’s downgrade of US debt may push up Treasury yields marginally, the medium-term rise in the US cost of borrowing will be very small.
Excerpts from UNITED STATES: AAA-rating loss boosts headwinds
While potentially severe market volatility will continue this week, loss of the US AAA-rating is very unlikely to provoke a systemic credit crisis similar to 2008. Despite its apparent dysfunctionality, Washington will enact significant fiscal consolidation on both the revenue and spending sides by 2013 — though the bulk will be put off until after presidential elections next year.
The essential S&P analysis is that US government debt is growing rapidly, and that in current political conditions the “effectiveness, stability and predictability” of US policy had “weakened” at a particularly inopportune moment. This assertion is unquestionably true, in the sense that the showdown between the Republican-majority in the House of Representatives and Democratic-controlled Senate and White House over the fiscal year 2011 budget and the unprecedented clash over the normally pro-forma vote to raise the statutory ‘debt ceiling’ undermined business and consumer confidence the context of tepid GDP growth.
Yet solutions are readily available. According to 2010 OECD data, the United States has the lowest tax burden in the developed world:
- US tax revenue as a percentage of GDP is just 24%, approximately half that of high tax jurisdictions including Denmark (48.2%) and Sweden (46.4%).
- Large OECD economies, including France, Germany, the United Kingdom and Canada also have tax takes greatly exceeding Washington’s.
- Strikingly, middle income OECD members and those considered relatively low-tax, including Ireland, South Korea, Slovakia and Turkey also collect a larger percentage of their GDP in taxes than the United States; only Mexico and Chile collect less.
Thus, with a modest increase on the revenue side through tax reform (reducing headline tax rates, while increasing revenue), accompanied by more substantial budget cuts (including mild entitlement reform), the trajectory of the US fiscal outlook would greatly improve.
In a related report, ECB action will not halt contagion crisis, OxAn is less confident about the effectiveness of the European Central Bank’s actions:
Any relief that the ECB can provide will be short-term — its earlier interventions did not prevent Greece, Ireland and Portugal from seeking bailouts. It could help mitigate the risk of a new credit squeeze, since rising sovereign bond rates are having a negative effect on bank shares, bank capital, and bank credit. However, markets are only likely to calm down once the EFSF is empowered to intervene; even then doubts remain about the size of its lending capacity.
And in Scenarios worsen as extreme risks rise, OxAn says uncertainty is further eroding consumer and business sentiment and increasing financial market volatility:
Lack of trust, coupled with absence of hard evidence about the strength of global economic growth, implies that the current market turmoil cannot be easily quelled. OECD policymakers have few tools left to address this situation after the fiscal stimulus packages adopted in 2008-09, and even the Chinese authorities seem less disposed to expand stimulus to offset a global slowdown.
The OECD’s chart of its composite leading economic indicators for the US looks like the beginning of the second phase of a double-dip recession could be developing. More broadly, the indicators are bearish for most major economies.
Compared to last month’s assessment, stronger signs of turning points in growth cycles have emerged in the United States, Japan and Russia. The CLIs for Canada, France, Germany, Italy, the United Kingdom, Brazil, China and India continue pointing to slowdowns in economic activity.
Moody’s Investors Service has confirmed the Aaa government bond rating of the United States following the raising of the statutory debt limit on August 2. The rating outlook is now negative.
In confirming the Aaa rating, Moody’s also recognized that today’s agreement is a first step toward achieving the long-term fiscal consolidation needed to maintain the US government debt metrics within Aaa parameters over the long run. The legislation calls for $917 billion in specific spending cuts over the next decade and established a congressional committee charged with making recommendations for achieving a further $1.5 trillion in deficit reduction over the same time period. In the absence of the committee reaching an agreement, automatic spending cuts of $1.2 trillion would become effective.
In assigning a negative outlook to the rating, Moody’s indicated, however, that there would be a risk of downgrade if (1) there is a weakening in fiscal discipline in the coming year; (2) further fiscal consolidation measures are not adopted in 2013; (3) the economic outlook deteriorates significantly; or (4) there is an appreciable rise in the US government’s funding costs over and above what is currently expected.
Moody’s also confirmed the Aaa ratings of financial institutions directly linked to the US government: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks.
In addition to the Aaa ratings of financial institutions directly linked to the US government, we have also confirmed the Aa2 subordinated debt ratings of Fannie Mae and Freddie Mac and the Aa2 Issuer ratings of the Farm Credit Bank of Texas and U.S. AgBank FCB.
Complimentary downloads of Moody’s statements on the US government bonds and on government-backed financial institutions are available at the Alacra Store.