NEW YORK: Moody's Investors Service warned on Thursday, Jan 27 of the growing likelihood that it could revise the outlook on the AAA credit rating of the United States to negative in the next two years.
Moody's had said late last year that the extension of Bush-era tax cuts for two more years would add to the likelihood of a negative outlook on the U.S. rating.
In a report issued on Thursday, the agency provided more details about the risks to U.S. ratings.
"Recent trends in and the outlook for government financial metrics in particular indicate that the level of risk, while still small, is rising and likely to continue to rise in the next several years," the ratings agency said in a report.
Prices for U.S. Treasuries were unmoved on the report, with benchmark 10-year notes remaining 6/32 higher on the day, yielding 3.39 percent.
In the thinly traded sovereign credit default swap market, the five-year cost to insure against a U.S. government default showed little change on the report.
It last traded at 50.5 basis points, off the day's earlier peak but near recent 11-month highs.
However, some traders said the report, which broke late on Thursday, could still seep into markets and pull bonds down on Friday.
"When you have punishing news like this from Moody's and other rating agencies, it will clearly leave a negative impression on Treasuries. You could see a rise on yields tomorrow," said Todd Schoenberger, managing director at LandColt Trading Inc. in Wilmington, Delaware. - Reuters
Moody's had said late last year that the extension of Bush-era tax cuts for two more years would add to the likelihood of a negative outlook on the U.S. rating.
In a report issued on Thursday, the agency provided more details about the risks to U.S. ratings.
"Recent trends in and the outlook for government financial metrics in particular indicate that the level of risk, while still small, is rising and likely to continue to rise in the next several years," the ratings agency said in a report.
Prices for U.S. Treasuries were unmoved on the report, with benchmark 10-year notes remaining 6/32 higher on the day, yielding 3.39 percent.
In the thinly traded sovereign credit default swap market, the five-year cost to insure against a U.S. government default showed little change on the report.
It last traded at 50.5 basis points, off the day's earlier peak but near recent 11-month highs.
However, some traders said the report, which broke late on Thursday, could still seep into markets and pull bonds down on Friday.
"When you have punishing news like this from Moody's and other rating agencies, it will clearly leave a negative impression on Treasuries. You could see a rise on yields tomorrow," said Todd Schoenberger, managing director at LandColt Trading Inc. in Wilmington, Delaware. - Reuters
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