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S&P cuts ratings outlook for the US of A
Comments
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What S&P have said is that IF the USA don't resolve their political differences over deficit reduction, there is a risk that their AAA rating COULD be downgraded at some point in the future.
I believe the 'figure' I saw quoted on Reuters was a 1/3 chance of it being downgraded in the next 2 years. Not great, but 2 years is a long time in politics
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edinburgher wrote: »I believe the 'figure' I saw quoted on Reuters was a 1/3 chance of it being downgraded in the next 2 years. Not great, but 2 years is a long time in politics
It sure is.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »They're as safe as anything can be. Which is not to say anything is 100% safe.
WRT the possibility of default, they will likely maintain their safe haven status as long as the USA maintains it's AAA rating.
Remember a few years ago the same ratings agencies issued similar warnings about the UK's AAA rating, to the excitement of more than a few on here, whilst Germany was considered to be the poster boy for responsible fiscal management.
Yet now our debt is considered safer than Germany's.....
Things change.
What S&P have said is that IF the USA don't resolve their political differences over deficit reduction, there is a risk that their AAA rating COULD be downgraded at some point in the future.
Even if it was downgraded, there's a huge gap between that and default. Greece has been downgraded frequently in the last few years, and they've got none of the advantages of the USA, and even they haven't defaulted yet.
How is UK debt considered safer ? UK CDS currently trades @ 58.67, German CDS trading at 46.670 -
on the one hand you say US treasuries are the safest asset out there. then you state, default is an option people don't like to think about.
make up your mind. either they're safe or they're not.
They're the safest asset out there because they are perceived to be the safest asset out there. At more than one point during the GFC yields on US Treasuries went negative. People were prepared to pay for the pleasure of lending the US Government money!!!
If that is the market perception it's becomes self-fulfilling. People look for a safe investment in bad times and pile into asset X. Analysts then look back and see what assets went up in bad times and the next time economic seas are looking choppy they recommend their clients get into asset X. Currently asset X is US Treasuries.
The perceived safety of Treasuries is mostly on an historic basis. It has to be as none of us know the future.0 -
They're the safest asset out there because they are perceived to be the safest asset out there. At more than one point during the GFC yields on US Treasuries went negative. People were prepared to pay for the pleasure of lending the US Government money!!!
If that is the market perception it's becomes self-fulfilling. People look for a safe investment in bad times and pile into asset X. Analysts then look back and see what assets went up in bad times and the next time economic seas are looking choppy they recommend their clients get into asset X. Currently asset X is US Treasuries.
The perceived safety of Treasuries is mostly on an historic basis. It has to be as none of us know the future.
what do you make of this story http://www.reuters.com/article/2011/03/09/us-pimco-debt-idUSTRE7285M020110309
how do you feel about the federal reserve buying up 70% of US treasuries? do you think the US municipal bonds will be brought up by the fed?
S&P is a farcicial institution. they're totally political in nature.
remember CDO's were triple A right up until they were worthless.0 -
on the one hand you say US treasuries are the safest asset out there. then you state, default is an option people don't like to think about.
make up your mind. either they're safe or they're not.
Safest doesn't mean "no risk". Any asset class carries a risk. But, the kinds of scenarios that could cause the US govt to default are generally Hollywood b-movie disaster grade.“The ideas of debtor and creditor as to what constitutes a good time never coincide.”
― P.G. Wodehouse, Love Among the Chickens0 -
what do you make of this story http://www.reuters.com/article/2011/03/09/us-pimco-debt-idUSTRE7285M020110309
how do you feel about the federal reserve buying up 70% of US treasuries? do you think the US municipal bonds will be brought up by the fed?
S&P is farcicial institution. they're totally political in nature.
remember CDO's were triple A right up until they were worthless.
What I think about the market for US Treasuries is immaterial. What I know about the market for them is that they are a bolt hole for international investors in hard times.
As long as investors continue to think like that then there's no amount of logic that makes any difference.
It looks like the market agrees with your take on S&P though:-)0 -
What I think about the market for US Treasuries is immaterial. What I know about the market for them is that they are a bolt hole for international investors in hard times.
As long as investors continue to think like that then there's no amount of logic that makes any difference.
It looks like the market agrees with your take on S&P though:-)
you missed the point i was making. if the US treasury sells the bonds and the federal reserve is buying them up and passing them back to the treasury, it means US debt is being monetised.
In the link i provided, the world's largest bond fund has dumped all of it's US treasury bonds. this illustrates that the top investors don't see the US treasury as a safe haven. far from it.0 -
you missed the point i was making. if the US treasury sells the bonds and the federal reserve is buying them up and passing them back to the treasury, it means US debt is being monetised.
In the link i provided, the world's largest bond fund has dumped all of it's US treasury bonds. this illustrates that the top investors don't see the US treasury as a safe haven. far from it.
There are no investors as top as PIMCO and you are right, the Fed is monetising debt.
The fact remains that at present on bad news, US Treasury yields fall. That might change in future, at some point it probably will. It hasn't changed yet as the rise in bond prices on the news that S&P were examining the US rating showed.0 -
I wonder whether the FTSE will ever recover from this mortal blow.
Wait a minute....0
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