S&P Backs Away From U.S. Downgrade Over Supercommittee Failure

Make this as good as official now that S&P has chimed in: NO RESOLUTION FROM SUPERCOMMITTEE!!!  You already knew that the Supercommittee was really just the “stuper-committee”… Impasse, again impasse.  The big fear from the financial world was that S&P or another ratings agency was going to downgrade the United States’ sovereign credit rating yet again.  S&P has effectively canned that notion, so the politicians now have no face to save.

S&P issued a notice that the ratings and outlook on the United States of America
at AA+ with a negative outlook and short-term A-1+ are not affected by the announcement of the Congressional Joint Select Committee on Deficit Reduction that so far has indicated that no Supercommittee agreement could be reached.

The inability to agree on fiscal measures that would stabilize U.S. government debt as a share of GDP is consistent with S&P’s decision on August 5 for its lowered rating at that time.

It (S&P) does note (or warn), “However, we expect the caps on discretionary spending as laid out in the Budget Control Act of 2011 to remain in force. If these limits are eased, downward pressure on the ratings could build.”

In short, no downgrade and no official warning.  We would equate that this does not even feel like a warning of a warning.  It feels like S&P is saying that the first downgrade was severe enough (and they are sorry for the downgrade).  That being said, there is now virtually no chance that the politicians are going to solve this measure ahead of the Thanksgiving deadlines.  The market had already told you that part of the equation.

Double-A is the new Triple-A!

More data from S&P is available here.

JON C. OGG