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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
|
0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Life After AAA: Analysts’ Thoughts On A ‘What If?’ Scenario |
wsj.com blogs - April 19, 2011 - By Michael Casey
Standard & Poor’s threw a cat amongst the pigeons Monday when it changed the outlook on its AAA rating for U.S. sovereign debt to “negative” from “neutral.”
S&P said there is now a one-in-three chance it would downgrade the U.S., but the somewhat muted reaction in foreign exchange and bond markets suggested investors felt S&P’s move could help force action in Washington and resolve the debt problem.
Nonetheless, we decided to ask leading analysts and investment managers what the economic and market impact would be if the U.S. does actually lose its coveted AAA rating. Would institutional investors bound by ratings rules be triggered into mass selling? What would happen to Treasury yields and private borrowing costs? How would corporate bonds, emerging market debt and other securities be priced if there were no longer “risk-free” rate to benchmark against? Would the dollar lose its status as the world’s reserve currency?
Opinions were mixed, but for the most part our correspondents’ answers painted a picture of a flexible Wall Street finding a way to cope. A post-AAA world would be different, but it would carry on.
Read excerpts from their responses below.
–Gary Jenkins, head of fixed income research at Evolution Securities in London: “A one-notch downgrade by one agency would generate huge headlines, the world would end for about half an hour, then we’d all go back to work. The U.S. is regarded as the safe haven, but the market gets used to these moves very quickly and takes them in its stride.”
–Martin Fridson, Global Credit Strategist, BNP Paribas Investment Partners: “You might have one or two corporate issues rated higher than government debt but you could still use Treasurys as a benchmark. Back in the Clinton era there was serious talk that there was such a surplus that the government would stop issuing very long-term debt, and one of the main arguments against that was to provide a benchmark to the bond market. So this has come up before but never been tested. But I think the market would eventually work it out and find the right levels, [although] it would undercut a lot of long-established assumptions.”
–Jim Reid, credit strategist at Deutsche Bank AG in London: “Over the last few years, events in the financial and corporate worlds have meant that fewer investors have absolute ratings triggers, so maybe there would be less forced selling than you would have seen 10 years ago. People have changed their mandates. There are three key buyers of Treasurys–the Fed, the Chinese, and the Japanese. The Fed isn’t restricted to only buying triple-A bonds and the other two, especially China, lend to the U.S. to support their own economic visions, so they won’t be constrained by a ratings change.”
–Richard McGuire, senior fixed income strategist at Rabobank in London: “We saw a strong performance from core European government bonds Monday, so they might gain from a potential safe-haven bid [after a U.S. downgrade]…And gilts could continue to do well given that the U.K. has a credible fiscal plan without those contingent liabilities. There could even be a knee-jerk positive reaction the Treasury market if there is a bid for safe-haven assets due to risk aversion, even if that risk aversion emanates from the U.S. After all, the U.S. dollar is still the world’s reserve currency. But ultimately a downgrade would crystallize worries about U.S. debt sustainability.”
–Carl Kaufman, Portfolio manager, Osterweis Strategic Income Fund: “If we were to get downgraded to AAA-minus, are people really going to believe that you’d rather own debt of some other AAA-rated country than the U.S. despite what S&P says? I think the behavior of investors will probably not change because we still do have the largest economy out there.”
For the complete blog.
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