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U.S. debt: what does the loss of a triple A rating mean?
The Hindu
Fitch's downgrade of US to AA+ is symbolic but unlikely to cause investors to flee. Despite the initial surprise, the downgrade will have little immediate consequence as the US still enjoys the confidence of markets and its debt is a critical part of the global financial system.
Fitch has downgraded its credit rating for the United States, becoming the second of the top-three ratings agencies to strip the country of a top AAA rating. The impact upon the world's top economy is likely to be just symbolic, at least immediately.
The AAA or "triple-A" rating is the highest rating that an agency gives to a country, locality or company concerning its ability to repay its debts.
The top three global ratings agencies: S&P Global, Fitch and Moody's, use the same system of letters, ranging from a top AAA rating through B, C and D for payment defaults.
The ratings are intended to reflect the economic and/or financial health of a borrower. For countries, the agencies look at economic growth, tax revenue, government spending, deficits and debt levels to determining their ratings.
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These ratings are intended for use by investors to guide them in their investment choices.
The lower a rating, the more investors are likely to demand higher interest payments from a borrower to compensate for the risk of not getting repaid.