Congress' debt-ceiling game of chicken has rating agencies sounding the alarm. S&P could slash rating to D on a default, while Fitch also warns of downgrade.

• Fitch Ratings said brinkmanship over the debt limit could damage the US's top-notch credit rating.
• If the debt ceiling isn't raised in a timely manner, the US risks a sovereign default, it wrote.
• A day earlier, S&P said a US default would result in a credit downgrade to a D rating, the lowest.

Fitch Ratings said on Friday that political brinkmanship over the US debt limit could damage the country's otherwise top-notch credit rating, a day after S&P Global Ratings issued a similarly severe warning.

Fitch said that while the debt ceiling - America's legislative cap on funding government spending with borrowing - may still be moved, a lack of political consensus on raising or suspending the limit could increase the risk of a US credit default.

"Fitch believes that the debt limit will be raised or suspended in time to avert a default event, but if this were not done in a timely manner, political brinkmanship and reduced financing flexibility could increase the risk of a US sovereign default," the ratings firm wrote in a memo. In the case of a missed payment, Fitch said it would downgrade the US rating until the default event was cured.

The memo then detailed once unthinkable considerations Fitch would take in assessing US creditworthiness: "willingness to pay, the effectiveness of government and political institutions, the coherence and credibility of economic policy, the potential long-term impact on the government's cost of funding and cost of capital for the economy as a whole, and the implications for long-term economic growth."

Fitch has had a negative outlook on the US's AAA rating since July 2020.

The Fitch statement came a day after S&P Global Ratings said an unprecedented US default would result in a credit downgrade to a D rating, the lowest possible.

"We don't think it's going to happen," Joydeep Mukherji, a S&P US credit analyst, told Reuters.

But if the US were to default on even a single instrument, "no one knows what the impact is," Mukherji said. "We don't know, we don't want to know but it's going to be big."

On Tuesday, Treasury Secretary Janet Yellen announced that the government would exhaust its cash resources by October 18 if the debt limit was not raised.