Fitch Ratings said today it will keep its rating on U.S. debt at the highest grade, AAA, and issued a "stable" outlook, meaning it expects the rating to stay there. It also said that the country's flexibility in monetary policy gives it the ability to absorb economic shocks. The dollar's central role in the world economy allows the U.S. to hold a higher proportion of debt to gross domestic product.
Fitch ratings was the best given by the three major credit rating agencies. Earlier this month, Standard & Poor's set off a maelstrom in the stock market after it downgraded long-term U.S. debt to the second-highest level, AA-plus, for the first time. The third agency, Moody's Investors Service, still lists the U.S. debt at AAA but says its outlook is negative.
Fitch said it would revisit the rating after the congressional committee that is supposed to figure out how to cut government spending presents its findings, due by the end of November. Fitch estimates the level of federal debt that's publicly traded(not held in government trust funds)will stabilize at around 85 percent of the economy by the end of the decade. That's higher than in other countries it rates as AAA and "at the limit" of what Fitch would consider consistent with a AAA rating, it said. The proportion of debt that's publicly traded now stands at 72 percent of the economy.
After Fitch's announcement Tuesday, investors bought up Treasurys, driving down the yield on the 10-year Treasury note to 2.26 percent from 2.31 percent late Monday. Analysts suggested that the move reflected concerns about Europe's economies rather than relief at Fitch's announcement.
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