Fitch downgrades US debt rating

Fitch Ratings downgraded its US debt rating on Tuesday from the highest AAA rating to AA+.

The downgrade comes after lawmakers negotiated up until the last minute on a debt ceiling deal, risking the nation's first default.

Fitch pointed to "the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions" in explaining its downgrade.

Fitch said the decision wasn't just prompted by the latest debt ceiling standoff but rather "a steady deterioration in standards of governance over the last 20 years" regarding "fiscal and debt matters."

The US government said it disagreed with the downgrade.

"I strongly disagree with Fitch Ratings' decision," said Treasury Secretary Janet Yellen in a statement on Tuesday. "The change by Fitch Ratings announced today is arbitrary and based on outdated data."

The last time US debt was downgraded by another major credit rating agency, S&P, came in 2011 when negotiations on the debt ceiling similarly reached the 11th hour.

The move had tremendous market impacts, leading to steep stock market declines and rising bond yields.

Markets on Tuesday were unfazed by Fitch's downgrade in after-hours trading.

Former Treasury Secretary Larry Summers said Fitch's decision is "bizarre and inept," particularly as the US economy "looks stronger than expected," he said in a post on Twitter, now formally known as X.

This is a breaking story and will be updated.