Moody's international rating agency has placed the United States' AAA sovereign rating on review for possible downgrade due to the increasing possibility that the statutory debt limit will not be raised, leading to a default on Treasury debt obligations, the agency said late on Wednesday.
"There is a small but increasing risk of a short-lived default. Moody's considers the probability of a default on interest payments to be low but no longer to be de minimis," Moody's said in a statement.
Moody's placed on review for possible downgrade the AAA ratings of financial institutions directly linked to the US government, such as Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks.
Moody's is the first international rating agency to put US ratings on review for downgrade.
On May 16, the US reached its $14.3 trillion sovereign debt ceiling, which was set earlier by Congress. The administration has only a few weeks to avoid a technical default, if Congress does not increase the debt limit on August 2.
The Congress, which is predominantly Republican, has refused to consider increasing the ceiling to $2.4 trillion, pushing for budget spending cuts to accompany any debt limit increase.