It’s official.\u00a0\u00a0\u00a0 US Treasury debt is now AA+ instead of AAA.\u00a0\u00a0 The US Treasury is saying S&P made an error in its math.<\/p>\n
What will the effect be?\u00a0\u00a0 Hard to know.\u00a0\u00a0\u00a0 There are some types of investments that require the fund manager to invest some or all of their money in only AAA rated bonds.\u00a0\u00a0 That will force them to sell their bonds.\u00a0\u00a0 In theory, that would lower the price of bonds, and increase the interest rates.<\/p>\n
Kind of by definition, an entity that is rated AAA can’t be holding a portfolio of bonds that aren’t rated AAA, so there may be a cascade of ratings downgrades through banks, insurance companies, mutual funds, etc….<\/p>\n
This is about 2 years overdue, and it won’t be pain free for S&P, but it had to be done.\u00a0 Hopefully Moody’s and Fitch and the others will join – there is some safety in numbers.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
It’s official.\u00a0\u00a0\u00a0 US Treasury debt is now AA+ instead of AAA.\u00a0\u00a0 The US Treasury is saying S&P made an error in its math. What will the effect be?\u00a0\u00a0 Hard to know.\u00a0\u00a0\u00a0 There are some types of investments that require the … Continue reading