The US will increase quarterly debt issuance after Fitch’s rating downgrade
The US government will issue $103 billion in long-term debt each month after Fitch Ratings downgraded its rating from AAA to AA+
The United States Department of the Treasury has announced that it plans to issue 103,000 million dollars (93,784 million euros) in long-term debt to repay the approximately 84,000 million dollars (85,590 million euros) in bonds maturing on August 15 of 2023.
The figure announced by the Treasury represents an increase of 7,000 million dollars (6,374 million euros) compared to the previous quarter and the first increase in two and a half years, according to Bloomberg data. 42,000 million dollars (38,242 million euros) in 3-year bonds will be sold, as well as 38,000 million dollars (34,600 million euros) in 10-year bonds and another 23,000 million dollars (20,942 million euros) in titles convinced to 30 years.
Likewise, the US Treasury has announced that, over the next three months, it expects to gradually increase the size of the auctions in the reference terms. In this way, it has confirmed that it will increase by 3,000 million dollars per month (2,731 million euros) the amount of the debt auctions with maturity of 2 years, as well as by 2,000 million dollars (1,821 million euros) that of the operations at 5 years and at 1,000 million dollars (910 million euros) that of the 7-year auctions.
The Treasury Department’s announcement coincided with Fitch’s decision to lower the long-term debt solvency rating of the United States one notch, which now stands at ‘AA+’ from ‘AAA’ with a stable outlook, as a reflection of the expected fiscal deterioration over the next three years and the high and growing burden of government debt.
The risk rating agency explained that its decision also takes into account “the erosion of governance” in relation to other ‘AA’ and ‘AAA’ rated sovereign issuers over the past two decades, as manifested in repeated clashes over limits of debt and last minute resolutions.
In this way, Fitch fulfilled its threat to lower the rating of the world’s leading economy, which it had placed on negative watch last May during the latest political crisis, in order to suspend the debt ceiling.
The Assistant Secretary for Financial Markets of the Treasury Department, Josh Frost, has stressed that the Administration sees a “limited or zero” impact on yields or prices from the rating downgrade announced by Fitch, according to Bloomberg. He stressed that “Treasuries remain the world’s preeminent safe and liquid asset and that the US economy is fundamentally strong.”
Source: dpa
(Reference image source: Colin Watts, Unsplash)
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