U.S. Government Finances Deteriorating, S&P’s Swann Tells MNI

The U.S. government’s finances have deteriorated “gradually” since Standard & Poor’s stripped the country of its top grade, Nikola Swann, an analyst for the credit-rating company, said in an interview with newswire MNI.

America has had an AA+ rating with a negative outlook since Aug. 5, 2011, when S&P downgraded the country for the first time, citing the government’s failure to agree on a plan to reduce deficits. The grade may be cut again by 2014, the New York-based unit of McGraw-Hill Cos. said in a June 8 report.

“The U.S. fiscal profile has continued to gradually deteriorate since last summer, at a rate in-between our base-case scenario and our downside scenario of August 2011, keeping the U.S. at the high end of our indebtedness range,” Swann said in an interview published today by MNI.

Bond investors ignored the downgrade last year, driving Treasury yields to the lowest levels in history, amid concern the U.S. economy was stalling and as Europe’s debt crisis intensified. Treasuries have returned about 6.4 percent since the rating cut as of yesterday, according to Bank of America Merrill Lynch index data.

The U.S. lacks a plan to regain the top rating, S&P analyst John Chambers said in a February interview on Bloomberg Radio. The U.S. rating will come under pressure if policymakers fail to agree on a deficit-cutting plan, Swann told MNI.

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