A ratings cut could shake confidence in the world’s premier debt market, send tremors through stocks and accelerate the tightening of credit conditions.
introduced a bill last week that would defang lawmakers’ ability to leverage the debt limit to force budget concessions.
The scope and severity of those risks are difficult to project or quantify, but “none of them are really good,” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center. The safety of Treasury securities is integral to the dollar’s dominance in global trade and financial markets. Foreign central banks have increasingly diversified the currencies they hold in reserve over the last two decades, fueling speculation that the greenback has lost some luster.
Some market participants believe those strengths would provide the ballast to steady any volatility in the immediate aftermath of a downgrade.
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