US credit rating already includes another possible shutdown, Fitch says

FITCH Ratings, which stripped the US of its top credit grade two months ago, said a potential government shutdown after Representative Kevin McCarthy’s ouster as House Speaker will not have an effect on the nation’s rating.

The comments came after McCarthy lost his leadership post following a revolt by Republican party hardliners over his compromise with Democrats to avert a shutdown last weekend. Analysts, including those at Goldman Sachs Group, said the ouster elevates the risk of a shutdown next month.

“We expect that political brinkmanship around government funding negotiations will remain tense and a shutdown later this year can’t be ruled out,” said Richard Francis, Fitch’s co-head of Americas sovereign ratings. “No matter, we don’t think that the political brinkmanship or even a government shutdown in the coming weeks would affect the US’s ‘AA+’/Stable sovereign rating.”

McCarthy had held the job of US House Speaker for nine months, with his removal coming after a decision to allow a vote on a funding extension. His replacement may be deterred from offering a similar bill before a Nov 17 deadline.

Fitch downgraded the US’s credit rating to AA+ from AAA in August, citing a “steady deterioration” in governance standards over the last 20 years, including on fiscal and debt matters. The move partly contributed to a bond rout that saw both 10-year and 30-year Treasury yields touch the highest levels since 2007.

Meanwhile, credit graders S&P Global Ratings and Moody’s Investors Service said they do not have plans to comment on McCarthy’s leadership change. Moody’s, the only remaining major ratings firm to give the US a top rating, warned in late September that its confidence is wavering ahead of a possible shutdown. BLOOMBERG