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TMCNet:  KBRA Releases Macro-Market Research on USA: KBRA Rates to Fundamentals Not Headlines

[January 10, 2019]

KBRA Releases Macro-Market Research on USA: KBRA Rates to Fundamentals Not Headlines

Kroll Bond Rating Agency's (KBRA) latest macro-market comment states that the current environment in the U.S. is more noise than substance from a credit perspective. KBRA assigned a AAA rating to the United States of America (U.S.) in March 2018. The rating reflects the U.S. dollar's premier reserve currency status that has been sustained despite a protracted period of policy change and uncertainty, and the unbounded access to liquidity that this provides. In addition, KBRA's view is that there is de minimus risk the government would decide not to honor its debt obligations or raise the debt ceiling. Should there be any meaningful signs of the following: a fundamental deterioration in the U.S. dollar's role as the world's premier reserve currency, a massive dumping of Treasuries that would lead KBRA to be concerned about access to liquidity, or if KBRA would come to believe willingness to honor debt obligations is not pristine, KBRA would reconsider the U.S. credit rating.

KBRA views credit ratings as a judgment that speaks only to the willingness and ability to honor debt commitments in whole and on time, features that have not meaningfully changed in the U.S. despite the current paralysis in Washington, D.C. Discussions of possible credit rating downgrades confuse credit risk with uncertainty over other aspects of the policy environment in the U.S. and, herefore, outlook changes or one-notch rating downgrades in this environment are more symbolic than meaningful.

To access the full report, click here.


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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

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