(Bloomberg) -- A downgrade of a key US credit rating by Fitch Ratings is on the table regardless of the outcome of debt-ceiling discussions — and the move could drag down Treasury yields amid a broader flight to quality, say TD Securities strategists.

“Even if the US is able to avoid the worst case scenario of payment delays and a default, we believe that Fitch still may still downgrade the US rating to AA+, citing political brinksmanship and an unsustainable debt path,” strategists Gennadiy Goldberg and Molly McGown said in a note Friday. 

The perilous status of the rating amid ongoing negotiations to raise the debt limit echoes 2011, when S&P Global Ratings downgraded the US amid a spending battle that roiled markets. That action paradoxically boosted Treasuries as investors fled to safe havens. 

Investors can expect a similar dynamic to play out this time, TD said. 

“We generally expect a risk-off market reaction if Fitch acts to downgrade the US, but don’t expect the reaction to be as extreme as the one seen in 2011,” the strategists wrote. 

Yields would likely decline — the 10-year by 10 to 15 basis points, shorter maturity yields by at least that much, they said. 

Fitch placed the US AAA rating on negative watch this week, ahead of a so-called X date when US government cash is forecast to run out, as soon as next week. The TD strategists said they “expect a deal to raise the debt ceiling to be reached before a default event even as negotiations go down to the wire.” 

On Friday, the dollar retreated as much as 0.4% before paring losses after posting four straight days of gains. Also on Friday, yields on Treasury bills maturing in early June fell as reports of negotiators nearing agreement on a deal turned positive. 

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