(Updates yields in the fourth paragraph.)
July 22 (Bloomberg) -- BlackRock Inc., which manages $3.7 trillion in assets, said the U.S. risks losing its top credit rating because the nation’s debt is “so significant,” according to Rick Rieder, chief investment officer for fundamental fixed income.
“The debt load in the U.S. is so large,” Rieder said during an interview on Bloomberg Television’s “Inside Track” with Deirdre Bolton and Erik Schatzker. Part of the reason why the U.S. risks losing “the AAA, it’s not necessarily the debt ceiling, it’s the fact that our debt in this country is so significant.”
The Treasury has said the government, which reached its $14.3 trillion borrowing limit on May 16, will run out of options to prevent a default on Aug. 2.
The yield on the benchmark U.S. 10-year note rose five basis points this week, or 0.05 percentage point, to 2.96 percent as prices of the securities fell. Yields fell five basis points today in New York on speculation President Barack Obama will reach an agreement with lawmakers to cut the budget deficit and raise the borrowing limit.
A rating reduction would be “ultimately terrific” for the U.S to encourage government to reduce its debt burden, said New York-based Rieder, who manages $595 billion.
Standard and Poor’s placed the U.S. on “CreditWatch” for a downgrade on July 14, a day after Moody’s Investors Service put the U.S. on review for a downgrade. S&P said the nation’s AAA rating might be lowered to the AA+ range with a negative outlook next month if an agreement is reached to raise the debt ceiling without a “credible” plan to lower deficits.
Fitch Ratings reiterated July 18 it would downgrade all defaulted Treasury securities that it ranks to B+ from AAA if the government’s misses a debt payment.
--Editors: Greg Storey, Dave Liedtka
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