Moody's put the kibosh on the McConnell Senate compromise this morning. Still no comment from S&P who warned last week that a downgrade could come within 90 days.
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A backup plan to raise the U.S. debt ceiling and avoid default could still lead to a negative outlook on the country's ratings, Moody's said, highlighting the plan's failure to substantially reduce the deficit.
The back-up plan offered by Senator Mitch McConnell would avoid any immediate downgrade of the coveted U.S. triple-A rating, Moody's analyst Steven Hess told Reuters in an interview, bringing relief to investors who fear an imminent downgrade of the coveted U.S. triple-A rating.
"But the numbers that are being discussed in terms of any possible deficit reduction coming out of this plan don't seem to be very large," Hess said. "Therefore, this plan might result in a negative outlook on the rating."
McConnell's plan, which is being negotiated with Senate Majority Leader Harry Reid, would include about $1.5 trillion in deficit-reduction measures.
Hess said a "much larger amount" of deficit-reduction measures would be necessary for Moody's to affirm U.S. ratings with a stable outlook.
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