Investors in U.S. Government Could See $100 Billion Loss if AAA Debt Rating is Downgraded

Investors in United States government debt could see a loss of up to $100 billion if the the government loses its pristine AAA rating, according to S&P Valuation and Risk Strategies.

“If Standard & Poor's or any of the other major rating agencies downgrade the U.S., Treasuries would likely drop in value, possibly by as much as $100 billion,” the firm said in a statement.

The announcement is yet another painful reminder of the difficult situation that the U.S. finds itself in. Ongoing debt negotiations have been less than fruitful in Congress, and an August 2 deadline to raise the $14.3 trillion debt limit is a little more than a month away.

According to a Financial Times report, "A ratings downgrade that results in higher bond yields and lower prices could also mean the U.S. Treasury paying $2.3-$3.75 billion a year more in interest on financing a $1,000 billion annual budget deficit."

President Barack Obama is expected to meet with Senate leaders on Monday over the raised debt ceiling. Talks between Republicans and Democrats have stalled largely on proposed tax increases and spending cuts.

Ratings firms like S&P and Fitch have increasingly warned of the dire consequences of Congressional inaction. In addition to more expensive borrowing, it's truly unknown how global financial markets would react to a U.S. debt downgrade.

Moody's has already declared that it could place the U.S. government on review for downgrade if there is no resolution before the deadline.

The Times report notes that "Currently, Treasury yields do not reflect concern about the U.S. losing its top rating. The yield on 10-year Treasury notes fell to 2.85 percent on Friday, a low for the year. Investors are concerned about a weaker economy and financial contagion from the euro debt crisis. Yields on four-week Treasury bills have been driven below zero."