Tags: Treasury | credit | rating | S&P

US Sovereign Credit Rating Affirmed by S&P With Stable Outlook

Friday, 06 Jun 2014 03:08 PM

The U.S.’ AA+ credit rating was affirmed by Standard & Poor’s, which cited the resiliency and diversity of the economy, almost three years after downgrading the nation for the first time amid political wrangling.

There is a less than one-in-three probability that the ranking will change in the next two years, the New York-based company said in a statement today. The outlook on the rating is stable.

Since the August 2011 downgrade from AAA, record budget deficits have shrunk, economic growth accelerated, the dollar rallied, stocks climbed to all-time highs and Treasurys strengthened their hold as the world’s preferred haven from turmoil. Still, S&P said a polarized policy-making environment and high general government debt and budget deficits constrain the ratings.

“Although the debt burden has stabilized, it will likely rise toward the end of the decade absent medium-term measures to raise additional revenue and/or to cut nondiscretionary expenditure,” S&P said today.

Investors routinely ignore ratings companies’ decisions. In almost half the instances, yields on government bonds fall when a rating action by Moody’s Investors Service and S&P suggests they should climb, or they increase even as a change signals a decline, according to data compiled in 2012 by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s. When S&P downgraded the U.S. government in August 2011, bonds rose and pushed Treasury yields down to records.

Treasurys due in 10 years rallied in August 2011, as yields dropped 57 basis points, the biggest monthly reduction in borrowing costs since December 2008. Yields on that maturity touched a record low 1.379 percent in July 2012. The security yielded 2.58 percent at 1:12 p.m. in New York, according to Bloomberg Bond Trader prices.

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The U.S.' AA+ credit rating was affirmed by Standard & Poor's, which cited the resiliency and diversity of the economy, almost three years after downgrading the nation for the first time amid political wrangling.
Treasury, credit, rating, S&P
286
2014-08-06
Friday, 06 Jun 2014 03:08 PM
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