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The US Loses Its AAA Credit Rating from S&P
Oliver's Insights - The US loses its AAA credit rating from S&P
This note looks at the downgrade to America's sovereign credit rating by Standard and Poor's. The key points are:
- Ratings agency Standard & Poor's has followed through with its threat to downgrade America's sovereign credit rating from AAA to AA+ because budget savings fell short of the desired levels thought to stabilise the debt to gross domestic product ratio.
- The impact this downgrade will have on US borrowing costs is likely to be minor, although the market will be swamped by the impact of weak economic growth and safe haven demand for bonds.
- Over time it could be a positive for the currencies of other AAA rated countries including the Australian dollar and Singapore dollar, but in the short term it only adds to existing uncertainty.
- The downgrade should have been priced into share markets already, but it reinforces pressure around fiscal tightening in the US as well as being a blow to US confidence.
- While shares could remain volatile for a while, there are indications that policy makers will swing into action, with reports the European Central Bank will buy Italian and Spanish bonds while the G7 leaders commit to a liquidity injection to stabilise markets.
For a copy of this edition of Oliver's Insights, please download the file below. (Acrobat Reader is required to view the file.) Source: AMP Wealthsure Pty Ltd (ABN 93 097 405 108) nor Seagrims Pty Ltd, make no representation or warranty as to the accuracy or completeness of any statement including, without limitation, any forecasts. The opinion of AMP does not necessarily reflect the opinion of Wealthsure Pty Ltd or Seagrims Pty Ltd.
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