NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned a AAA long-term issuer rating to the United States of America (USA or U.S.). KBRA has also assigned K1+ short-term issuer ratings to the sovereign. The long-term ratings have a Stable Outlook. The ratings are unsolicited.
|Foreign Currency Sovereign Rating - Long Term||AAA||Stable||Assigned|
|Local Currency Sovereign Rating – Long Term||AAA||Stable||Assigned|
|Foreign Currency Sovereign Rating – Short Term||K1+||Assigned|
|Local Currency Sovereign Rating – Short Term||K1+||Assigned|
The main credit support factors include:
- Premier reserve currency status, providing the federal government with abundant access to liquidity.
- The world’s largest economy, accounting for one-quarter of global GDP.
- Relatively favorable demographics, although deteriorating.
- A robust institutional structure and competitive economy that provide for sustainable growth and investment.
The main credit concerns include:
- A widening federal deficit and growing debt, which already exceeds 107% of GDP.
- Increasing polarization of domestic politics and greater variance (and unpredictability) in policies that could serve to dampen investment.
- Falling productivity.
- A large external current account deficit that suggests competitiveness pressures.
The U.S.’s premier reserve currency status is the most critical factor underlying the AAA credit rating. Rising levels of political polarization in the country as marked by repeated episodes of brinkmanship over the debt ceiling and budget, while concerns, are not sufficient to alter KBRA’s view of the U.S. credit rating. This assertion is based on our belief that the federal government will pay its debt in full and on time. In short, in KBRA’s view, the U.S. government has both a AAA willingness and ability to honor its debt obligations, and this is reflected in the stable outlook on the ratings.
The U.S. economy’s large external deficit and sizeable net international debtor position are, in KBRA’s view, not critical rating factors given the government’s unfettered access to liquidity and financing. Fiscal developments are more worrisome. KBRA expects that the federal government’s large debt burden (77% of GDP including only debt held by the public, and 107% of GDP for total debt), is set to expand with the Tax Cuts and Jobs Act and subsequent measures. KBRA expects a return to fiscal consolidation in the medium term, especially as the macro impacts become clearer.
The rating methodology used for these ratings was Sovereigns Rating Methodology published on May 10, 2017.
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.