Moody’s Affirms U.S. AAA Rating, Assigns Negative Outlook After Debt Deal’s ‘First Step’

The compromise package to raise the U.S. debt ceiling signed by President Barack Obama Tuesday was enough to avert a default and, for now, get the ratings agencies off Uncle Sam’s back.

Moody’s affirmed its AAA rating of U.S. government debt Tuesday morning, hours after Fitch Ratings signaled it is likely to do the same when it completes a review at the end of August. While Moody’s acknowledged the debt ceiling hike eliminated the risk of default it also, unsurprisingly, assigned a negative outlook and said a downgrade could be in the offing 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.

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