Moody's downgrades United States credit rating on increase in government debt
MsMorrisine
Posts: 34,803 ✭✭✭✭✭
i was busy when the news it. maybe between 4:15-4:45
can't miss the dive on the stock futures charts
Moody’s Ratings slashed the United States’ credit rating down a notch to Aa1 from the highest triple A on Friday, citing the budgetary burden the government faces amid high interest rates.
“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the ratings agency said in a statement.
Current maintainer of Stone's Master List of Favorite Websites // My BST transactions
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dollar took a 0.1% dive and i can't see much notice from gold and silver
Can't go by beforee Sunday 6 PM, too early. Besides, they are up.
It's a non-event. In 2011 S&P downgraded the U.S. debt.....it said we weren't a AAA-rated currency anymore....volatility hit the financial markets...and money flowed INTO U.S. TREASURIES for safety !!
The market spoke then. It will speak again. My guess is the dollar will get a thumbs up, Moody's will get a thumbs down.
Ratings agencies are no more honorable than government statisticians.
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Me thinks the Moody's staff has other motivations.
Makes them more popular at the parties they attend. LOL
I have a meeting with them in a few weeks for a pension fund I advise. I will be asking them in what world is the U.S. Aa1 which is only 1 grade higher than Illinois, which is in the toilet.
I wonder what the ratings of the BRICs are?
Knowledge is the enemy of fear
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If BRICS don't plan to borrow a lot of money, they might not care what their credit rating is.
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Then Illinois is too high and should be downgraded.
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Sez the resident briks chearleader. GT LF! THKS!!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Wooooha! Did someone just say it's officially "TACO™" Tuesday????
I've been through these downgrades before. It wasn't pretty. 10 feet through the snow one way just to git to skools. Plan accordingly. Rays of sunshine on those doomsday bunker grapes. Instant therapy. RGDS!!!!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Wooooha! Did someone just say it's officially "TACO™" Tuesday????
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I am not a fan of BRICS. The "cheer-leading" comment is ridiculous, as is the unnecessary "Get a Life !" (GT LF!).
BRICS exists and does not appear to be going away any time soon. It is something that we all may have to deal with eventually.
Some people (such as yourself) want to dismiss and ignore it. But doing so won't make it go away.
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The way you write, I guess you never actually made it (to school).
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watch the personal attacks
everything was fine until people stopped talking about 1 trillion a year just in interest payments as if it's no big deal
the next step to the confirmation is the downgrades. of course this is the last of the 3
now there are stories of huge holders selling their treasuries
i guess there will be no bunkers needed and lives haven't be affected so far, but eventually there will be economic effects. large scale selling of treasuries and low demand at auction will send interest rates up higher than where they are at now. and that's the start. we nuts who kept talking of a debt problem were laughed off. it's now not funny anymore
Currently a gold rating.
ZeroHedge makes debut at White House press corps briefing
Knowledge is the enemy of fear
Aren't these the same rating agencies who rate gold as "risky", which is more of a philosophical opinion than one of fact.
I knew it would happen.
Thirteen colonies were third world countries until they united. BRICS is a union.
ZeroHedge makes debut at White House press corps briefing
And this just in: released data claiming to have added nearly 400,000 jobs from July to September of 2024, is being scrutinized after new data released by the Labor Department suggests that none of those jobs ever existed.
ZeroHedge makes debut at White House press corps briefing
is this from zero hedge?
nope, based on recently released jobs data
ZeroHedge makes debut at White House press corps briefing
Gold IS risky. It's not able to provide stable income or price gains.
Let's see them coordinate monteary policy and fiscal policy.
Let's also see the NY Yankees agree to fund part of the payroll of the Boston RedSox.
Gold IS risky. It's not able to provide stable income or price gains.
Yeah, and you can't eat gold either. Nothing in life is guaranteed, but under this monetary regime it's virtually guaranteed that the dollar will continue to lose purchasing power.
Not necessarily so with gold. Good luck with your bond market.
I knew it would happen.
You obviously are either not paying attention to world economies or you have your blinders on. BRICS is far from a club.
But I understand. If you're not going to pay attention to what is going on, I'm the last person to tell you.
ZeroHedge makes debut at White House press corps briefing
Bonds are low-risk, low return.
Bonds are low-risk, low return.
Forget low return. Loss of principal will be a major factor now.
I knew it would happen.
treasuries are becoming higher risk
This was a Nothing Burger.
I remember 2011 very well -- I went on vacation that week. Markets moved 2-3% every day.
Market looks to finish in the green as we head for the final hour.
Only if rates go appreciably higher. Bond math is very easy to compute. Durations have shortened with higher coupons and yields....losses with a 4.5% 10-year are harder to bring about then when the 10-year is at 1.5% (or less).
immediate effect is different than long-term signal
I asked him last week if he knew what duration was. I didn't get a response, so apparently not.
Knowledge is the enemy of fear
I haven't been a student of bond duration, so I looked it up, so thanks for the thought. Assuming that what you say is accurate and durations on the long bonds are shortening and bond values on the long end of the market are as a result less sensitive to interest rate fluctuations - that does not discount the fact that the debt load is overwhelming already or that unfunded liabilities never seem to be taken into account by Wall Street.
I knew it would happen.
Even though duration decreases as yields increase, I personally wouldn’t want to hold a 10 year treasury and I’m terrified of the thought of a 30 year treasury. For an institution, depending on the nature of their liabilities, longer term fixed income investments may of course be appropriate. As an individual investor. I don’t like them.
Even though duration decreases as yields increase, I personally wouldn’t want to hold a 10 year treasury and I’m terrified of the thought of a 30 year treasury. For an institution, depending on the nature of their liabilities, longer term fixed income investments may of course be appropriate. As an individual investor. I don’t like them.
Your answer is quite telling. If you are terrified of personally owning a 30 year treasury, how on earth would it be appropriate for an institution for an institution such as a pension plan, even considering the nature of their liabilities over a longer time horizon?
Unless rates start to decline, the problem only gets worse, and I don't see the market becoming happy with upwardly spiraling debt levels and chronic government overspending.
I knew it would happen.
@jmski52 asked "If you are terrified of personally owning a 30 year treasury, how on earth would it be appropriate for an institution for [] such as a pension plan, even considering the nature of their liabilities over a longer time horizon?"
That's a good question; the answer is at the heart of asset liability management. Some institutions take on liabilities that are long term and well-defined. (well-defined in the sense that the obligation to a beneficiary is substantially or fully fixed, and does not change as market conditions change; this might be true, for example, of an immediate annuity offered by an insurance company). If the interest guarantee underlying the obligation is less than that of a 30 year treasury, and the duration is very close to that of the treasury, you can in effect lock in a return by buying the treasuries. In this situation, if interest rates go up, the value of your treasuries goes down, but so does the value of your liability. You are "matched". Since the beneficiary has no flexibility (e.g. no early surrender type option), by keeping the assets in place over the lifetime of the liability, you will make money regardless of how interest rates evolve. That's the concept. In practice, of course it's a little harder than this. It is rare to have a "perfect" match of assets and liabilities, so you will need to rebalance your asset portfolio periodically.
(from my personal investing perspective, I don't buy treasures because I don't have any (concrete) liabilities to match against; so, I'm concerned with the downside risk on a 30 year treasury)
Pension plans don't have a life span as do you and I. They invest forever. They are betting there is no end to the US economy. They smartly realize that if the US economy does end, their long term investment becomes irrelevant; after all the investment is other people's money.
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Federal Reserve Bank behavior and the US economy as a whole typically follow the economic behavior of Japan. The Fed first cut interest rates to zero in 2008. It introduced its first large-scale Quantitative Easing that same year. Japan first cut rates to zero in 1999. And it has been engaged in QE off and on since 2001.
Bank of Japan is now the single largest owner of Japanese stocks and Japanese bonds in the world. Is Japan about to go bust?
ZeroHedge makes debut at White House press corps briefing
@derryb asked “Is Japan about to go bust”
No.
us will go bust before japan
I was an ALM consultant for institutions. 30-year bonds are perfect to defease longer liabilities.
When I started in the business, the 30-year Treasury had a 15% coupon and a duration of about 12. Today it's closer to 24.
Would you buy the 10yr at 7 or 8%?
Knowledge is the enemy of fear
Thats a tremendous amount of trading potential.
Knowledge is the enemy of fear
Nobody wanted bonds, you could get 12% in a money market fund.
I remember going to my Summer job in 1981 with my father and hearing all the radio commercials for zero coupon bonds (duration = maturity !) like CATS or TIGRs or other cool names like that. They were yielding 16-17% in some instances.
That's stock market-like returns year after year for 30 years.
And they all wanted the 1yr CD or bill because it was yielding 18-20%. You would like 18% for 1 year or 12% for 30. 99% would take the 1 year.
Haven't heard CATS or TIGRs in a long time. That's old school!!!
Knowledge is the enemy of fear
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Knowledge is the enemy of fear
@RedneckHB asked "Would you buy the 10yr at 7 or 8%?"
Yes, depending in the circumstances, I would definitely think about 10 year treasuries if they got into that range. Said differently, I haven't forever banned longer duration treasuries from my portfolio. But, with the current yield curve (1 year about 4.1 % and 10 year at 4.5 %), I don't think the 40 bp compensates for the risk of rising rates. And, I'd be surprised (though not astounded!) if rates dropped significantly from here.
(The current yield curve is quite interesting, being a rather flat U-shape.)
I can't see the 10-year getting that high unless inflation makes a move to 4-5%.
Can you see inflation at 4-5%? We were there just 2 years ago. How long would it have to stay at 4-5%?
Knowledge is the enemy of fear
It would have to PERSIST....a 1 or 2 year "blip" won't change inflation expectations which are actually more important than the ACTUAL past inflation. Of course, actual past inflation does inform inflation expectations.
10-year Treasury would have STRONG demand with a 5-handle. Japanese yields are mid-1's.
https://www.worldgovernmentbonds.com/
Note that the bottom rung of Investment Grade (BBB-) has Romania and Hungary, 300 and 250 bp. cheap to the U.S. The notion that we won't fund our debt at these levels is insane.
Bottom Line: much of what you see and read is hysteria by people who look at yields like this every few months or years, not every hour like the pros.
Warren Buffet said it best: don't bet against America. He was talking stocks, but the same applies to our debt.