Raising the stakes as negotiations over the debt ceiling approach their conclusion, ratings agency Fitch has placed the United States' AAA" rating, its highest ranking, on a negative watch.

In preparation for a potential downgrade, Fitch placed the nation's highest ranking "AAA" long-term foreign-currency issuer default rating (IDR) on rating watch negative. This could happen as soon as next week if lawmakers fail to increase the amount that the Treasury can borrow.

Failure to come to an agreement, according to Fitch, "would be a negative signal of the broader governance and willingness of the U.S. to honour its obligations in a timely fashion," and would not be consistent with a "AAA" rating.

Fitch said, "we believe risks have increased that the debt limit will not be raised or suspended before the X-date, and as a result, that the government may start to default on some of its debts." “Prioritization

It did, however, add that it anticipates a debt ceiling agreement before the x-date (when the U.S. Treasury exhausts its cash reserves and ability to take extraordinary measures without assuming further debt).

According to Fitch's assessment, the US hit its $31.4 trillion debt limitation on January 19, 2023, at which point the Treasury started taking exceptional steps to prevent exceeding it. 

These extraordinary measures may run out as early as June 1, 2023, according to the Treasury. 

"The cash balance of the Treasury reached $76.5 billion as of May 23, and sizeable payments are due June 1-2, meaning that the x-date could arrive as the Treasury indicated and before an agreement is reached or finalised with votes in the House and Senate," the statement read.

Fitch affairms India's sovereign rating based on its strong growth prospects.