The tension around the U.S. debt-limit negotiations ratcheted up after Fitch Ratings warned the nation’s AAA rating was under threat from a political standoff that’s preventing a deal.

Fitch may downgrade its assessment to reflect the increased partisanship that is hindering a resolution despite the fast-approaching so-called X date, it said in a statement, referring to the point at which Washington runs out of cash. It moved the U.S. to “rating watch negative” under its classification.

Markets have been showing increasing nervousness over the standoff, with Treasury-bill yields slated to mature early next month surging past 7%, while the S&P 500 Index has declined for two days. Economists project a U.S. default could trigger a recession, with widespread job losses and a surge in borrowing costs.

Fitch’s warning “underscores the need for swift bipartisan action by Congress to raise or suspend the debt limit and avoid a manufactured crisis for our economy,” said Lily Adams, a spokesperson from Treasury.

The cost of insuring U.S. sovereign debt against default with derivatives has risen, and Fitch’s statement also casts the spotlight on other rating agencies to see how they might react. A White House spokesperson said the report demonstrated the urgency of reaching a speedy resolution.

“The worst‑case scenario would be if the showdown leads to the government missing a debt payment for the first time, which might result in a widespread or lasting downgrade to the credit rating of U.S. Treasuries,” said Nikolaj Schmidt, chief global economist at T. Rowe Price. “So many assets are priced in direct relation to U.S. Treasuries that the turbulence from a more pronounced downgrade would be felt in markets worldwide.”

In 2011, S&P Global Ratings drew fire for downgrading the U.S. from AAA after a similar brush with default. That spurred a selloff in risk assets like equities around the world, but ironically boosted Treasuries as investors sought out havens.

Strategists at JPMorgan Chase & Co. and Morgan Stanley have warned that an impasse threatens the outlook for equity markets, while traders have also piled into swaps and options for major currencies to hedge their portfolios. PGIM Fixed Income says the U.S. will find itself in a similar impasse all over again, and has has bought long-dated credit default swaps on that basis.

The yen, a traditional haven currency, spiked as traders reacted to the Fitch news before reversing gains. Benchmark 10-year Treasury yields hovered around their highest in more than two months on expectations that interest rates may continue to rise even as the debt ceiling issue drags on.

“The hawkish repricing of Fed rate hike expectations has not been interrupted in recent days by the lack of progress made by U.S. officials over raising the debt ceiling,” Lee Hardman, a currency strategist at MUFG Bank Ltd, wrote in a note.

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