In it, but not of it. TPM DC

Report: S&P Will Downgrade Dramatically Unhonored Treasuries After August 4

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But that's not the case.

"U.S. Treasury bills maturing on August 4 would be rated 'D' if the government fails to honor them," Reuters reported, based on an interview with S&P's managing director.

That's what happens when you don't pay your bills on time. What happens to the individual bonds that do get paid? They might get dinged, but not as severely. Per Reuters, "Unaffected Treasuries would be downgraded as well, but not as sharply."

All of this will be easily avoided if Congress raises the debt limit by the end of July. But Republicans and Democrats are at a serious impasse, and the credit markets are now firing warning shots at Washington in the hope that they wake up.