There’s a lot of talk about the debt ceiling right now, but the major worry surrounding markets is the potential for a U.S. downgrade.
While Societe Generale don’t think we’re going to flirt with a downgrade over Republican opposition to the debt ceiling, they do think we already are anyway.
It’s just a matter of when, and how fast interest rates rise on our borrowing. Assuming the Bush tax cuts are extended, 200 bp hike in interest rates would push us into AA territory before the end of 2011.
A 50 basis point hike would see use there by 2014.
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