Fitch Warns on U.S. Triple-A Credit Rating If Shutdown Tests Debt Ceiling

The United States could lose it triple-A credit rating if the current government shutdown triggers another debt ceiling breach, Fitch Ratings cautioned Wednesday, as the country runs a record deficit and pushes overall borrowing past $22 trillion.

The U.S. government shutdown entered its nineteenth day Wednesday with no hope in sight that Democrat and Republican lawmakers can breach the current budget impasse, as both remain divided on President Donald Trump's demand for $5.7 billion in funds to build a wall along the U.S. border with Mexico. Standard & Poor's cut the U.S. federal government's triple-A credit rating for the first time ever during a similar budget and debt ceiling spat in 2011.

"From a rating point of view it is the debt ceiling that is problematic," Fitch's global head of sovereign ratings James McCormack told Reuters Wednesday. "If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget ... and whether all of that is consistent with triple-A" 

Benchmark 10-year U.S. Treasury note yields touched a multi-week high of 2.73% overnight and have risen some 25 basis points from the low reached just prior to last week's blowout jobs data from the Bureau of Labor Statistics.

The Fitch comments come just hours ahead of a key 10-year bond auction from the U.S. Treasury Department later today, as well as the sale of €4 billion in benchmark bunds from the German debt office.

The U.S. debt ceiling is set to be reinstated on March 2 at $22 billion, but Democrat lawmakers in Congress are hoping to pass a so-called Gephardt rule that would allow the House to suspend it in parallel with the passage of a budget spending bill. Republicans in the Senate, however, are unlikely to agree to such a measure, setting up the prospect of a the U.S. Treasury being unable to make debt payments to domestic and foreign creditors in the event of an extended government shutdown.