Wednesday, July 27, 2011

Fund managers look forward to US downgrade

The largest fund managers such as BlackRock, Loomis Sayles and Franklin Templeton Investments expect United States to be downgraded.

Analysts at BlackRock note that when the policymakers face the deadline, the debt ceiling will be raised. Never the less, the nation will be still likely to lose its top credit rating.

Specialists at Loomis Sayles Bond Fund doubt that the White house and the Congress will manage to reach an agreement and expect that at least one agency will reduce US debt rating. At the same time, the AAA or AA rating doesn’t exactly matter for US debt as the Treasuries will continue to be a large and liquid market, says the fund.

Strategists at BNP Paribas, however, do think that the credibility of US bonds is declining. Yields indicate investors are favoring bank or company debt over Treasuries. 10-year Treasury yield hit 2.97% level today, though it’s still below the decade’s average of 4.05%.

Economists at Franklin Templeton Investments say that the lack of long-term solution of American debt issues will cast doubt on the risk-free status of US Treasuries.

published by FBS Holdings © 2011