The timeliness of federal policymakers reaching an agreement on the debt ceiling could have significant consequences for the United States' creditworthiness. Even if the worst-case scenario of a debt default is prevented, failure to meet other payment obligations could still damage the country's reputation.

According to Bloomberg, credit rating agencies maintain an optimistic outlook that a deal will be reached. President Joe Biden and Congressional Republicans have been engaged in ongoing negotiations to avert a US default, as the US borrowing limit needs to be raised before June 1, the date when Secretary Janet Yellen has warned that the government will exhaust its funds to fulfill all obligations.

Despite partisan tensions, both sides have expressed a positive sentiment regarding the negotiations, suggesting that an agreement might be within reach. Consequently, Moody's Investors Service, Fitch Ratings, and S&P Global Ratings, which downgraded the US in the aftermath of the 2011 debt ceiling standoff, are all maintaining a stable outlook.

Nevertheless, time is running out, and the possibility of a default still looms. Previously in March, Republicans proposed "prioritizing debt" as a means to avoid the crisis, which involves paying off certain obligations before others. For example, the government could continue making payments on bonds while postponing payments to certain contractors.

If this were to occur, Fitch has indicated that the US would be downgraded from its AAA status. Yellen has also criticized this strategy, referring to it as a "default by another name."

Meanwhile, Moody's has stated that it might downgrade the government's credit to Aa1 if there is a delay in interest payments on bonds, a situation that could arise if the Treasury runs out of funds.

The creditworthiness of the United States is central to the risk-free reputation of its Treasury market, and even the mere threat of a downgrade could lead investors to retreat from debt linked to the world's largest economy.

Furthermore, prolonged delays in resolving the debt ceiling issue could have more than just an impact on US credit. According to Goldman Sachs, even if a default is averted, market liquidity could be depleted as efforts are made to replenish the Treasury Department's cash balance. As of last week, the Treasury General Account held $60.6 billion, a significant decrease from the previous week's $114 billion.