Fitch Ratings has affirmed the U.S. long-term foreign and local currency Issuer Default Ratings (IDRs) and Fitch-rated U.S. Treasury security ratings at 'AAA'.
As part of the rating agency's actions, it has also affirmed the U.S. Country Ceiling at 'AAA' and the short-term foreign currency rating at 'F1+'. The Outlook on the long-term ratings is Stable.
In terms of structured finance, Fitch-rated deals in this sector have little direct linkage to the U.S. government's sovereign rating, Fitch said prior to the affirmation.
So even if the U.S. sovereign rating were placed by Fitch on Rating Watch Negative or even downgraded into the 'AA' category, most U.S. structured finance ratings would not have been similarly downgraded.
Fitch's criteria also allowed structured finance offerings to be rated up to 'AAAsf' in cases where the sovereign rating is 'A' or higher.
However, analysts said earlier that some of Fitch's structured finance ratings such as GSE-related securities could have been affected, and there also might have been more negative and pervasive indirect effects of a U.S. downgrade that might have impacted the rating of Fitch-rated structured finance securities.
"If the U.S. is downgraded, it would precipitate a downgrade of the GSEs, which would in turn affect the guaranteed MBS," said Rui Pereira, head of U.S. RMBS for Fitch Ratings, told ASR for an article in the magazine's August issue.
"A negative rating action on the U.S. may pressure ratings performance for some structured finance transactions in numerous ways," added Kevin Duignan, head of U.S. structured finance for Fitch, also told ASR for the same article. "Counterparty ratings may be affected, interest rates could become volatile, economic activity may be curtailed and liquidity could be constrained."
Fitch's action follows Standard & Poor's lowering of its long-term sovereign credit rating on the U.S. to 'AA+' from 'AAA' on Aug. 5.
S&P also said that the outlook on the long-term rating is negative. At the same time, the rating agency affirmed its 'A-1+' short-term rating on the U.S. and removed both ratings from CreditWatch, where they were placed on July 14, with negative implications.
In a related development, Moody's Investors Service on Aug. 2 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.