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Fitch: short-term government shutdown not seen as threat to municipal bonds; debt ceiling is a bigger worry

From the October 4, 2013 issue of Public Power Daily

Originally published October 4, 2013

By Jeannine Anderson

In an Oct. 1 report, Fitch Ratings said it believes the partial shutdown of U.S. government operations due to the lapse in appropriations will have minimal impact on U.S. municipal credits, if the shutdown is short-lived, as Fitch expects. However, if the shutdown is extended, the impact could become "pronounced," Fitch said.

The federal fiscal year began on Oct. 1. Because appropriations for federal discretionary programs have not been enacted, federal offices and services that are not specifically excepted are closed.

A bigger worry, Fitch said, is that Congress might fail to enact legislation raising the federal limit on debt. Defaulting on federal debt could create broader disruptions in the financial markets.

In a report released yesterday on that possibility, the Treasury Department was more pointed.

"A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo events of 2008 or worse," said the Treasury report.

The report is posted on the Treasury's website.



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Senior Vice President, Publishing 
Jeanne Wickline LaBella

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro