SAN FRANCISCO (MarketWatch) — The failure of the supercommittee to reach a compromise on a debt-reduction plan exposes the U.S. sovereign rating to more downgrades, with ratings agencies expected to fire their first salvo by the year’s end.

“It is just a matter of time before the government’s rating is cut,” Steve Ricchiuto, Mizuho Securities’ chief economist, said in a report.

“I would not be surprised if S&P puts the Treasury on watch for another downgrade in the weeks ahead and that Moody’s or Fitch move before the Dec. 23 date when the legislation implementing the Super Deficit Committee’s recommendations were scheduled to be enacted,” he added.

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The scope and the severity of the actions will depend on how the politicians handle sequesters, or the automatic cuts scheduled for 2013, as well as payroll taxes and extended benefits.

The Congressional Joint Select Committee on Deficit Reduction, better known as the supercommittee, announced late Monday that it failed to reach a deal on a $1.2 trillion budget-deficit reduction plan that will result in spending cuts equal to that amount to take effect in 2013. Read about supercommittee’s failure

Citigroup also believes a downgrade is in the offing.

“Leading politicians stating that they would seek an end run around the sequesters would speed up the Moody’s downgrade, which now appears likely in the first half of next year,” said Greg Anderson, senior FX strategist at Citigroup.

U.S. is rated triple-A with a negative outlook by Moody’s. A cut would follow the decision by Standard & Poor’s on Aug. 5 to drop its rating on the U.S. to AA+ from AAA.

When the stock market opened for trading the following Monday, panic sales dragged the Dow Jones Industrial Average down more than 600 points, its worst day since late 2008.

News of the supercommittee’s impasse also battered stocks on Monday, dragging the Dow into the negative territory for 2011. The benchmark index fell 248.85 points, or 2.1%, to close at 11,547.31. By Tuesday, the impact was muted as investors shifted their focus back to Europe which is grappling with debt woes of its own. Read MarketWatch’s stock market report

Moody’s: Supercommittee results not ‘decisive’

Moody’s on Tuesday declined to comment on the specific date for a review but said that the outcome of the supercommittee negotiations would not be “decisive” in analyzing U.S.’s rating.

“As Moody’s stated on Nov. 1, the deliberations of the Joint Select Committee would be informative for the rating analysis but not decisive, and failure to reach an agreement would not by itself lead to a rating change for the U.S. government,” said Moody’s in a statement.

Earlier this month, Moody’s also stated that an analysis of the U.S. rating “will incorporate any fiscal actions taken during 2012, including the budget for the 2013 fiscal year, the policy environment resulting from the elections in November 2012, and how the so-called ‘Bush tax cuts’ are dealt with at the end of that year.”

Economic performance is also an important factor, it added, since this will impact the budget.

The Commerce Department earlier this morning said the U.S. economy grew 2.0% in the third quarter, compared with a first reading of 2.5%, as companies reduced inventories and scaled back investment. Read details on U.S. GDP growth

“Major deviations from a modest rate of GDP growth over the course of 2012, either upward or downward, would also be relevant to our analysis,” Moody’s said.

The Federal Reserve on Nov. 2 cut its forecast on the 2012 U.S. GDP growth to a range of 2.5% to 2.9%.

Fitch review ends this month

Meanwhile, Fitch had warned in August that failure by the supercommittee could result in a revision of the rating outlook to negative. It rates the U.S. at triple-A with a stable outlook.

A negative outlook “would indicate a greater than 50% chance of a downgrade over a two-year horizon. Less likely would be a one-notch downgrade,” Fitch reiterated in a statement Monday.

Fitch also added that it now expects to wrap up its review of the U.S. sovereign rating by the end of November.

Standard & Poor’s said Monday the inability of the supercommittee to forge a deal will not affect the U.S.’s rating or outlook.

“However, we expect the caps on discretionary spending as laid out in the Budget Control Act of 2011 to remain in force. If these limits are eased, downward pressure on the ratings could build,” it said.

Still, not all is doom and gloom.

Kevin Giddis, president of fixed-income capital markets at Morgan Keegan & Co., was more upbeat about the developments on Capitol Hill.

“Politicians may be willing to take the risk of failing to act responsibly, but I don’t believe they are willing to be assigned blame for increasing taxes or weakening our military capabilities. In that light, my guess is that a compromise will ultimately be reached,” he said.

He also pointed out that ratings agencies may face a credibility problem if they were to downgrade the U.S. given that all of its debt is in dollars which in theory, the government can print at will.

“While there are obvious negative repercussions involved with inflating our way out of any problems we face, the reality is that the probability of a payment default from the government is as close to zero as possible. Any rating less than AAA for the U.S. government says more about the rater rather than the borrower,” Giddis said.