Moody's Could Downgrade U.S. Government Bond Rating If It Misses Debt Payments

Even Uncle Sam needs to make his payments on time or risk taking a hit on his credit rating. Moody’s is reviewing the U.S. government’s Aaa government bond rating, and could downgrade it if government gridlock fails to raise the federal debt ceiling. The government has reached its $14.2 trillion debt limit and lacks congressional authority to borrow more to pay its bills, according to the Treasury Secretary, starting Aug. 2.

Moody’s Investors Service announced the move in a statement. Here’s an excerpt:

“The review of the U.S. 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.”

Moody’s, one of three major ratings agencies, still considers the government to be at low risk of defaulting.

Announcement: Moody’s Places US Aaa Government Bond Rating and Related Ratings on Review for Possible Downgrade [Moody's via MSNBC]