Last night Moody's Investors Service confirmed the U.S. 'Aaa' government bond rating, although the agency maintained a negative rating outlook.

It also confirmed the 'Aaa' ratings of securities directly linked to the U.S. government bond rating such as FFELP-backed student loan ABS.

But, unlike the U.S. government bond rating, these related bonds do not have outlook qualifiers, according to Barclays Capital analysts. Prior to the negative watch placement of the U.S. government bond rating on July 13, and subsequently all FFELP 'Aaa' ABS ratings, there were 158 FFELP ABS classes of notes that were already on downgrade watch. These notes are still on review either due to Moody's operational risk criteria or for performance issues.

Meanwhile, Standard & Poor's has yet to weigh in on the debt ceiling deal, which has left all of its 'AAA' FFELP ABS ratings on negative watch.

"We believe the most likely short-term outcome of the debt ceiling agreement is that the formation of the deficit reduction super-committee will buy some time from S&P," Barclays analysts said. "In our view, the agency will likely wait for the results of the committee's negotiations, due in late November, before making a final determination on the U.S. government's rating, and those of FFELP-backed ABS."

They also believe rating uncertainty will remain for triple-A FFELP classes, specifically those rated by S&P, until there is a resolution on the budget deficit. This is why Barclays analysts have maintained their neutral weighting on FFELP-backed ABS.

Moody's had cited the debt ceiling agreement as the initial step to achieving the long-term fiscal consolidation that is necessary to maintain the U.S. government debt within the 'Aaa' level in the longer term.

Barclays analysts noted that the negative rating outlook shows that there could be a downgrade if the following were to occur: there is a weakening in fiscal discipline in the coming year; more fiscal consolidation measures are not implemented in 2013; the economic outlook deteriorates considerably; or there is an notable increase in the U.S. government's funding costs more than what is currently expected.

S&P on July 21 published a "what-if" scenario analysis of potential rating outcomes for structured finance securities, which depended on the result of the debt ceiling negotiations. With an agreement to raise the debt ceiling having been reached, S&P's most onerous scenario, a U.S. government default, is no longer a possibility.

According to Barclays analysts, which of the other two scenarios comes to pass depends on the extent of budget deficit reduction, which is still fluid at this point. The debt ceiling agreement mandates the formation of a bipartisan, bicameral committee that is charged with finding at least $1.5 trillion in deficit reduction over the next ten years. This is in addition to the $917 billion in spending cuts called for in the debt ceiling legislation or face automatic, across the board cuts of $1.2 trillion.

S&P stated that it needs to see credible deficit reduction that puts the U.S. on a sustainable fiscal path to be able to affirm the U.S. rating. Without this type of resolution, the U.S. rating could be downgraded to 'AA+', S&P stated.

In addition, Moody's could place the U.S. government back on rating watch negative for reasons cited above such as the deterioration in fiscal discipline in the coming year or if the committee does not reach an agreement on a sufficient deficit reduction.

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