Ratings company cuts U.S. T-bonds to near junk status

High level of debt to gross domestic product and faltering debt limit negotiations on Capitol Hill caused Egan-Jones to cut U.S. Treasury bonds to AA+ from AAA – one step above junk bond status.

Because politicians may fail to reduce government spending and “The most likely outcome of the negotiations is that the federal government will fail to reduce its debt to gross domestic product in any sort of meaningful fashion,” said Sean Egan, president of the company, “the major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending.”

Both Moody's Investors Service and Standard & Poor's have put the U.S. Debt rating on review for downgrade.

The nation reached its borrowing limit on May 16 and Republicans are using the talks to press for cuts in spending in exchange for an increase in the $14.3 trillion debt ceiling.

According to Timothy F. Geithner, U.S. Secretary of the Treasury, the nation will run out of options to prevent a default on its full faith and credit debt on August 2.