NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: U.S. Treasuries Expected to Remain Global Benchmark
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647996
In the event of a U.S. sovereign downgrade by a major rating agency, U.S. Treasuries and broader financial markets could experience near-term volatility, according to Fitch Ratings. However, Fitch expects that, over the near to medium term, in a moderate downgrade scenario (e.g., to 'AA'), U.S. Treasuries would likely retain their standing as the benchmark security of the global fixed income market.
The possibility of a downgrade of the current 'AAA' U.S. sovereign debt rating has triggered numerous warnings about the consequences of such a move for global financial markets and the U.S. economy. Common speculation is that a downgrade could cause a significant sell-off of U.S. Treasuries, funding market dislocations, and longer-term structural increases in U.S. borrowing costs.
Although a sovereign downgrade could spark near-term market volatility, Fitch notes that credit risk, as reflected by the credit rating, is only one of several drivers of pricing. In a moderate downgrade scenario, Treasuries are expected to remain the benchmark security that anchors global fixed income markets for the foreseeable future. Their status as the global benchmark security is bolstered by the underlying strength of the U.S. economy, Treasuries' deep liquidity and fundamental role in the global financial architecture, and the lack of comparable, marketable alternatives.
The full report is available at 'www.fitchratings.com'. Fitch's Macro Credit Research team prepared the report and based its analysis on a hypothetical downgrade situation. The report does not comment on the U.S. sovereign credit rating. Fitch's most recent ratings-related commentary is also available on the Fitch web site.
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.