Fitch’s downgrade of the US credit rating is likely to exacerbate unease about the country’s debt position, political polarisation and the global standing of the US dollar, investors and analysts said
, with the ratings agency saying expected fiscal deterioration over the next three years and repeated debt ceiling disputes threaten the government's ability to pay its bills.The yield on the benchmark 10-year US Treasury note, which moves inversely to prices, gained and at one point reached its highest point since November. Fannie Mae and Freddie Mac Long-Term Issuer Default Ratings and senior unsecured debt ratings to 'AA+' from 'AAA.
Yet some market participants also said the ratings cut was a reminder that the country’s fiscal picture is becoming increasingly precarious, which could heighten worries for everyone from asset managers to global central banks and others holding massive amounts of U.S. government debt.Fitch’s call will"cause people to stop and ask questions," said Robert Tipp, PGIM Fixed Income's chief investment strategist and head of global bonds.
Fitch’s downgrade will likely be used at a summit of leaders from the Bricss trade bloc including Brazil, Russia, India, China and South Africa this month as a public relations ploy to help tout a new currency, they wrote in a Wednesday report.If that matters in shaping sentiment toward the dollar in the court of global public opinion then the status of the dollar just took another notch downward
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