) -- A downgrade of U.S. debt by ratings agencies Standard & Poor's or

Moody's Investors Service

(MCO) - Get Report

would probably add $100 billion annually to borrowing costs, according to estimates by JPMorgan Chase.

Speaking to the media on a conference call Tuesday organized by Wall Street trade group SIFMA, Terry Belton, JPMorgan's global head of fixed income strategy, argued that if the U.S. were to lose its triple-A credit rating, it would result in Treasuries rising by 0.6% to 0.7% over the medium term.

"That's a huge number--we're talking about sort of a long term and permanent increase in U.S. borrowing costs," Belton said.

Both Belton and Bank of America senior economist Mike Hanson saw a downgrade as far likelier than a default, though they appeared to differ on the chance of a default.

Hanson said that while the likelihood of a default is low, "unfortunately it is not zero."

Belton, on the other hand, said "there is virtually a zero chance" of a default--at least this year.

"Even if the debt ceiling isn't raised, the Treasury has other things available to them that are all quite disruptive but are better than missing an interest payment," Belton said.

As for the likelihood of a downgrade, Belton pointed to comments by Standard & Poor's, which he said were "the more alarming of the two."

"If Congress doesn't use this opportunity to make significant credible reductions in the deficit which they've sort of indicated were in the neighborhood of $4 trillion they would look to downgrade us," Belton said, explaining S&P's position.

SIFMA members, including large U.S. financial institutions like

Bank of America

(BAC) - Get Report


JPMorgan Chase

(JPM) - Get Report



(C) - Get Report


Goldman Sachs

(GS) - Get Report


Morgan Stanley

(MS) - Get Report

, as well as European companies like

Credit Suisse

(CS) - Get Report


Deutsche Bank

(DB) - Get Report


have been preparing

for operational and market issues around a U.S. downgrade or default.


Written by Dan Freed in New York


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