US foreign currency debt ratings being downgraded, but the negative impact should not be long-lasting đ€š
To further ârub salt in the woundâ, Fitch Ratings announced after the market-close that it has cut its long-term foreign-currency issuer rating on the US to AA+, stating âthe repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal managementâ. While the headlines sound ominous, we would caution against any over-reaction against the headlines, as the S&Pâs last rating cut back in 2011 actually led to a drop in US yields and a rise in the USD as a counter-intuitive âflight to qualityâ reaction. We would be surprised to see any lingering and negative price impact on bond yields from this action alone.
