USA downgrade from Fitch

A Fitch director spoke with Reuters and offered some more colour on the downgrade decision:

  • Fitch held meetings with the US Treasury ahead of the decision warned about decision, not about downgrade
  • Key areas behind decision were deterioration on fiscal and debt side, along with governance
  • Governance deterioration gives less confidence in govt's ability to address fiscal and debt issues
  • Debt ceiling debate happens every 2 years or so, may happen again in 2025

It's unclear who knew exactly what and when but it's clear to me that the White House got a heads up because they were very quick to blame Jan 6 and Republicans. There was also a curious selloff in bonds yesterday before the decision and I have to wonder if those things are related.

In any case, there's nothing really new here as the reasons for the downgrade were laid out in the announcement itself.