(CN) – Moody’s Investor Service, one of the world’s premiere credit agencies, said Tuesday it will consider the United States government in default of its debt obligations if it misses its October interest payments.
Moody’s, along with Standard & Poor’s and Fitch Group, is considered one of the Big Three credit rating agencies. It provides international financial research on commercial and government bonds, and ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default.
Last month, Fitch Ratings said the United States’ perfect credit rating will be at risk if Congress failed to raise the debt ceiling this fall by the end of September.
Moody’s said Tuesday it won’t downgrade the country’s “AAA” credit rating if the government misses the Sept. 30 deadline to raise the debt ceiling set by Treasury Secretary Steven Mnuchin, but that it would do so if the department misses interest payments due Oct. 15 and 31.
“Moody’s view is that the debt ceiling will ultimately be raised and that the US will continue to meet its debt service obligations on time and in full,” the agency said in a statement on Tuesday, adding that it expects Treasury to prioritize interest payments.
“In the event, however unlikely, that the US were to miss an interest payment, Moody’s would consider it a default,” the agency said.
Moody’s said a U.S. default “would reflect the evidence of somewhat weaker US institutional capacity to repay debt obligations in a timely manner, and the probability, even if low, of similar events reoccurring in the future.”