Roach

WASHINGTON — The United States lost its top-notch AAA credit rating from Standard & Poor's Friday, in a dramatic reversal of fortune for the world's largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus
on concerns about growing budget deficits.

U.S. Treasuries, once undisputedly seen as the safest investment in the world, are now rated lower than bonds issued by countries such as the United Kingdom, Germany, France or Canada.

The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.

U.S. government officials had been bracing for a downgrade.

CNBC's John Harwood reported that S&P told the federal government at 1:30 p.m. ET Friday that it was preparing to downgrade the country's rating. But Harwood reported that after U.S. officials pointed out an error in how S&P computed the ratio of U.S. debt to the gross domestic product, S&P decided to reconsider.

A source said S&P's calculations were off by "trillions," CNBC reported.
The earlier reports said the main reasons likely to be cited for a U.S. downgrade by S&P included political confusion surrounding the process of hiking the debt limit and doubt that agreement would be reached on more deficit reductions.

On July 14, S&P put the government on a credit watch with negative implications, meaning there was at least a one in two chance the U.S.’s long-term debt would be downgraded within 90 days.

After Congress reached a deal this week on budget cuts valued at about $2.1 trillion over 10 years, the other two main rating agencies reaffirmed the nation's top credit rating status for now although said they would continue to evaluate the situation. S&P never issued a comment. still has not commented.

Moody's assigned a negative outlook for U.S. sovereign debt, meaning it could still downgrade the securities, although probably not anytime soon. Moody's said there would be a risk of downgrade if there is "a weakening in fiscal discipline, a deterioration in the economic outlook or if Congress fails to adopt more deficit-reduction measures in 2013.

Another major agency, Fitch, said it would complete its review of the nation's sovereign debt rating by the end of August and did not rule out a downgrade.

Standard & Poor's had warned that the nation's credit rating would be subject to a downgrade without a credible deficit-reduction package worth $4 trillion over 10 years. The package agreed to by congressional negotiators falls well short of that mark.

A downgrade could result in higher market interest rates and could force some fund managers to sell Treasury securities. But it is unclear what the result would be if only one of the major agencies issued a downgrade.

The rating agencies have been under fire since the financial meltdown of 2008 because they often gave high ratings to bundles of mortgage-related securities that were risky and ultimately failed.

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The Rev

The Rev

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Maturin

Polite of them to release this news on a Friday night, after all the markets have closed for the weekend. Can't wait for the reaction Monday morning.

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"Creating something is not a democracy. The people have no say. The artist does. It doesn't matter what the people witter on about: they and their response comes after. They're not there for the moment of creation."

--Russell T Davies

Being

AA+....
dont forget the +

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R.I.P. Gov

Dr. Nick Nasty

welcome to the third world-up next: Europe!

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Roach

It just reminds me of the testimony of the rating agencies during the internet bubble and the housing bubble collapses.
They clearly stated that their ratings "are only are our opinions" and should not be used solely to determine the value or liquidity of an investment.

This is available in the movie/documentary "Inside Job"

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Institutional and individual investors rely on bond rating agencies and their in-depth research to make investment decision. Rating agencies play an integral role in the investment process and can make or break a company's success in both the primary and secondary bond market. While the rating agencies provide a robust service and are worth the fees they earn, the value of such ratings has been widely questioned after the 2008 financial crisis, and the agencies' timing and opinions have been criticized when dramatic downgrades have come very quickly. Any good investment firm, whether it's a mutual fund, bank or hedge fund will not rely solely on the bond rating agency's rating and will supplement their research with their own in-house research department. This is why it's important for an individual investor to not only question the initial bond rating, but frequently review the ratings over the life of a bond and constantly question those ratings as well.
Major Players
While there are a number of rating agencies out there, the three major ones usually referred to are, Moody's, Standard and Poor's, and Fitch. These agencies assign credit ratings for issuers of debt obligations or bonds in addition to specific debt instruments issued by those companies. The issuers of debt can be companies, nonprofit organizations, state and local governments. In addition, the U.S. government issues bonds that will be eventually traded in an open market setting. Each agency has their own models by which they evaluate the credit worthiness of a company which directly affects the rate the issuing firm will offer to purchasers of the bonds upon issue.


Bond Rating Agencies: Can You Trust Them?

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deadhead94

This concerns me. Who gets the nukes when the republic falls apart? How many do the hillbilly states have?

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Štulic

This is not polite but highly irresponsible. I'm holding onto 4 open positions in forex carrying over the weekend, I might just wake up monday morning with a huge unexpected loss because o this shit. Forex never sleeps, you just can't trade it weekends.

On the other hand the downgrade is well justified and deserved.

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Roach

we'll know 8:00 PM Sunday evening if the Asian markets feel the same way

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לזיין את הקופים

Maturin

It was meant with a hearty dose of irony. It's a very old trick: release bad news that hits on a Saturday morning when the fewest people are paying attention (Hitler was a master at it). Not to take away from the seriousness of it, nor to say it isn't deserved, but the timing of it says this is as much a political move from S&P as it is a financial one.

EDIT: And by political I don't necessarily mean it in a *completely* cynical sense. It may be a calculated move to let people digest it for the longest possible time before it hits the markets. Maybe a more stable reaction than say, releasing this at 2pm on a Weds.

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"Creating something is not a democracy. The people have no say. The artist does. It doesn't matter what the people witter on about: they and their response comes after. They're not there for the moment of creation."

--Russell T Davies

John F. Kerry

the way roach is talking excitedly about this you would think there was a republican in the white house. or that the senate was republican majority.

...yea it sucks and is a shame...

too bad when the last president left office we had half the debt we have now.

OBAMA THROWS “DOWNGRADE PARTY” AT WHITE HOUSE*|*Weekly World News

...its now a fact that obama is the only president in the history of the united states to preside over a debt rating downgrade.

nice pedestal there mr obams.

change we can believe in .... to cost us more for loans.

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Nasa under Obama

HTAM

Civilian Murder > Record Debt when you're talking about what happens on who's watch.

Just getting 'Your Pet Goat'

Štulic

Last president inherited a budget surplus from Clinton. If Bush didn't reverse Clinton's policies and revived Reagan's, on top of getting engaged in senseless costly wars, there wouldn't be any crisis whatsoever now. Add the banking bailouts and here you are, credit downgrade.
Obama has literally nothing to do with it, and you know that too.

I'm amazed how you can keep up with your drivel for years and years on here and people still have the patience to respond and debunk it every single time.

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DubStyle311

This will be interesting. It could go either way really.

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I may be wrong, but I doubt it.

John F. Kerry

sorry but thats just ridiculous.

Even if one were to accept your premise about bush making costly (and stupid) decisions, which i dont in all cases. a response to 9/11 was more than warranted, and on the 10th anniversary of 9/11, because of things he did and put into place, osama is fishbait.

so, anyway, accepting your premise, which i dont.

the fact is, all of bush's decisions which took place while he was in office, and the debt that grew, all that stuff NEVER DOWNGRADED OUR CREDIT RATING... sure there was even similar partisan debate during the other crises- but the fact is that Bush maanged it FAR BETTER than obama simply because WE DIDNT LOSE OUR GOLD PLATED CREDIT RATING UNDER BUSH....

he was able to make it seem to the world and the markets that what needed to get done did- instead with Obama he had political motivations to make it a huge cliffhanging issue, even tho he voted against it as senator obama, so he got ultra sanctimonious on an issue that he was a total hypocrite on from the get go, the result was that class warfare and "political fights" got revved up, to a point much worse than when Bush , clinton or reagan were in office... just look at the crap on msnbc... those liberals were anxious and excited for a big fisticuffs... and the result is not surprisingly, more of the uncertainty that has defined obama's presidency.

seriously thats not even shill material here... bush managed to manage (lol) the crisis each time in a different way, despite what you may say- obama also raised our debt limit and debt to gdp ratio to HISTORICAL levels... which put us in a category with japan and others... bush, or ANY other president , simply HAS NEVER DONE THAT.... bush might have spent stupid amounts of money on stupid things- he did.... but you cant say that bush did the irresponsible thing obama did as president- which is- policies which based on the numbers and based on what he did - so he knew he was doing this at the start when axelrod proposed obamacare and the new new deal, he intentionally took us down this road, and this road almost unavoidably led us to have too high debt to gdp (which bush simply factually did not do) and as a result, we are now AA+.

this isnt even partisan guys, this is obvious. if you wanna argue otherwise, go ahead....argue with actual facts not roaches mr magoo driving the staionwagon off the cliff with the radio turned up really loud.

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Nasa under Obama

The Rev

I'm surprised you have long positions in the current market.

It will certainly effect the bond market, but generally when people flee bonds, they move to commodities and stocks. And with all the new money flooding into the market over the last couple of years, those markets should do pretty well in the next year or two at least.



The Rev

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Štulic

Well I'm longing the Yen and the Swiss Franc and shorting Cable (GBP/USD), this is the one I'm worried about could open way above my entry price on Monday just because of the downgrade. I longed USD on Friday after positive NFP, shouldn't have carried it over the weekend, that's all my fault.

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clive

this is one of those news stories that i couldnt give two shits about.

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Ego Tripping

He tried to get revenue, he was denied at every turn...every poll I see they are overwhelmingly placing the blame on the Republicans. Can't say I disagree.

It's not so much that he's the first President to preside over a lowered credit rating, it's that this is the first Congress to preside over a lowered credit rating. He had no ability to draft the legislation, they did, and they failed...and it seems the majority of the people see that.

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kamikazi89

not really.the debt deal was bad politics and even worse policy.
the republican leadership embraced it, and now they own it

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katie west is the best