Fitch Downgrades Fannie Mae, Freddie Mac After US Rating Cut

Reuters
By Reuters
August 3, 2023Business News
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Fitch Downgrades Fannie Mae, Freddie Mac After US Rating Cut
Fannie Mae's headquarters in the nation's capital in Washington on Nov. 9, 2011. (Chip Somodevilla/Getty Images)

Ratings agency Fitch on Wednesday downgraded U.S. mortgage finance giants Fannie Mae and Freddie Mac Long-Term Issuer Default Ratings (IDR) and senior unsecured debt ratings to ‘AA+’ from ‘AAA’ after the U.S. rating downgrade on Tuesday.

The agency said the cut was a result of Tuesday’s downgrade and was “not being driven by fundamental credit, capital or liquidity deterioration at firms.”

“The downgrade to the ratings of Fannie and Freddie was a certainty after Fitch’s downgrade of the US rating since the two ratings are linked,” said Gennadiy Goldberg, Head of US Rates Strategy at TD Securities.

“I don’t think many investors will be surprised by the change since, much as with the US sovereign debt, the one-notch downgrade will not materially impact investing decisions,” he added.

In late May, Fitch had placed the ratings of the mortgage finance giants on watch for a possible downgrade as U.S. lawmakers’ negotiations to raise the government’s debt ceiling dragged on without a resolution.

The move to cut U.S ratings on Tuesday drew an angry response from the White House and surprised investors, coming despite the resolution of the debt ceiling crisis two months ago.

 

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