McCarthy signals debt deal optimism as US is put on credit watch

  • Speaker of the House Kevin McCarthy, R-Calif., walks in the Capitol Rotunda on Capitol Hill in Washington, Sunday, May 21, 2023. (AP Photo/Patrick Semansky)

WASHINGTON — House Speaker Kevin McCarthy’s optimism that White House and GOP negotiators would reach a deal in time to avert a potentially catastrophic default didn’t mollify analysts as the U.S. was put on a ratings watch late Wednesday. The California Republican said after a four-hour meeting between his and President Joe Biden’s hand-picked negotiators that a deal was possible before June 1, the date by which Treasury Secretary Janet Yellen has warned the U.S. could run out of money to pay its bills.

“I still think we have time to get an agreement, and get it done,” McCarthy said after the meeting concluded. Hours later, Fitch Ratings placed the United States’ AAA credit rating on watch, a sign of growing unease about the country’s ability to avert a first-ever default. The U.S. received a credit downgrade during similar turmoil in 2011. Fitch still expects a resolution to the debt limit before the June 1 so-called “X-date.” U.S. stocks are showing increasing signs of concern over the standoff, with the S&P 500 index down 0.7%, after a 1.1% slump on Tuesday. In the Treasuries market, investors are demanding ever-higher premiums on bills that mature when the government is seen most at risk of default. Rates on Treasury bills due June 1 on Wednesday briefly surpassed 7%, comparable to yields on junk debt. House Democratic Whip Katherine Clark blamed Republican “hostage-taking” for risking the U.S. credit rating. “Even the ratings watch is going to cause economic problems,” she told reporters at the Capitol Wednesday night. “This is the beginning.” Rep. Pramila Jayapal, chairwoman of the progressive caucus, said.

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