Instant view: Moody's warns U.S. default risk rising

Reuters News
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Posted: Jun 02, 2011 1:54 PM
Instant view: Moody's warns U.S. default risk rising

NEW YORK (Reuters) - Moody's Investors Service said on Thursday there is a small but rising risk of a short-lived default by the United States if there is no increase in the statutory debt limit in coming weeks.

KEY POINTS: * Moody's says the U.S. triple-A rating will be maintained if default is avoided and the debt ceiling is raised. * A downgrade over the debt ceiling impasse would probably be to the double-A range.

COMMENTS:

FRED DICKSON, CHIEF MARKET STRATEGIST, D.A. DAVIDSON & CO., LAKE OSWEGO, OREGON:

"I regard it as not surprising, and another negative piece of information for U.S. investors to digest. I think there is some consternation in terms of how politicians are going to play out the debt ceiling between now and Aug 2.

"We're in a period of above-average volatility, and I think this will probably add to that."

RYAN LARSON, HEAD OF EQUITY TRADING, RBC GLOBAL ASSET MANAGEMENT, CHICAGO

"The tone has been set for a couple of weeks now after seeing weak data recently that show the growth is moderating here, if not slowing. It shouldn't come as a major shock but nonetheless, this is a headline-by-headline traded market. If we see a negative headline, then the market will react to it."

WILLIAM LARKIN, FIXED INCOME PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT,

"It is way overdue -- a key component of the credit rating is the fiscal outlook for the country."

KATHY LIEN, DIRECTOR OF CURRENCY RESEARCH AT GFT FOREX, NEW YORK:

"Moody's threat to downgrade U.S. debt certainly doesn't help the dollar. Moody's downgrade adds pressure on Congressional leaders to work hard at reaching an agreement to increase the debt ceiling. However with that in mind, Moody's is still lagging behind S&P in their rating actions and threats. Putting a country's rating on review is also not the same as a downgrade. An actual downgrade is still unlikely scenario."

MARKET REACTION: STOCKS: U.S. stock indexes were little changed BONDS: U.S. bond prices added to losses FOREX: The dollar added to gains against the dollar