US treasuries futures fell late on Wednesday after Moody’s Investors Services placed the US government on review for a possible downgrade, which could see it stripped of its AAA rating.
The ratings agency upped the likelihood of the US defaulting on loan obligations, saying that the possibility was higher than a month ago when it first warned the government.
The Moody’s statement said: “The review of the US government’s bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes. As such, there is a small but rising risk of a short-lived default.”
Meanwhile, negotiations over raising the debt limit stalled last night between President Obama and Republicans. The limit currently stands at $14.3trn and needs to be raised by the August 2 deadline.
