The U.S. Downgrade, One Year Later

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The Wall Street Journal – One Year Later, What U.S. Downgrade?

One year ago, Standard & Poor’s Ratings Services stripped the U.S. of its triple-A debt rating. Since then, demand for Treasury securities has only grown. Sunday marked the one-year anniversary of S&P’s downgrade of long-term U.S. debt to double-A-plus, which came after Congress struggled to reach a deficit-reduction deal. The action sparked a flight into safe-haven assets, with U.S. debt still near the top of many investors’ list of hiding spots.Another fiscal battle is brewing now, but investors aren’t as worried about what this might mean for Treasurys. Even for investors worried about the long-term health of U.S. finances, last August’s reaction showed that Treasurys have a stronghold on safe-haven seekers.”Investors are tempered by the experiences from last year,” said Robert Tipp, chief investment strategist at Prudential Financial Inc.’s fixed-income division. “Last year it was a complete unknown with what would happen if we get downgraded. Now we’re beyond that.”


Bill Gross tweeted this yesterday:

Gross: Happy 1-year USA-debt downgrade anniversary everyone! Washington has done nothing since & fiscal cliff looms. Not good Uncle Sam!

We agree.

Source: Bianco Research




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