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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
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S&P National Bond Index
|
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
|
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
|
848.03 |
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S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
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S&P U.S. Preferred Stock Index (TR)
|
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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Default or Not, Downgrade or Not, The Problem Is Chronic |
Seeking Alpha - July 28, 2011 - By Russ Koesterich
As the debate over the debt ceiling continues in Washington, I, like most market watchers, believe that a deal will be reached and the debt ceiling will be raised.
Rather than whether a deal will be reached or not, the big outstanding questions now are whether credit ratings agencies will downgrade U.S. debt from its AAA rating even if a deal is reached and what the fallout of such ratings downgrades would be.
In terms of what kind of deal I expect, I believe the beginning of a compromise solution between the parties is starting to emerge. Ultimately, I believe that the final deal will raise the debt ceiling and will include a modest headline deficit reduction number (probably somewhere in the $1.5 to $3.0 trillion range), of which a good portion of the savings will remain unspecified for now. In addition, the deal will likely include some future mechanism, such as a committee, for exploring a more significant deal in the future. The major issues such as revenue and entitlement spending that will determine fiscal solvency over the long term, however, are unlikely to be addressed prior to 2013.
As for the more pressing question of the chances of a downgrade, I believe there is roughly a 50% probability of a downgrade if the final deal contains headline cuts around $2 to $2.5 trillion — roughly the size of the cuts in the Senate plan. If however, the cuts associated with any hike in the debt ceiling come in below that level, I believe the odds of a downgrade go up.
So what would a post-downgrade environment look like? The near-term implications are uncertain as there is no precedent for this type of event. Not only has US debt always been rated AAA with no previous instances of a downgrade, but there has never been an instance in history — at least that I’m aware of — in which the issuer of the reserve currency was also the biggest debtor. In short, we’re in unchartered territory. Still, it’s almost certain that a downgrade of US debt would be highly disruptive to financial markets.
Longer term, the implications of a downgrade are clearly negative. It could lead to higher borrowing costs for the US government, corporations and consumers. Higher borrowing costs would then be a drag on economic growth, corporate profitability and overall US living standards. A downgrade would also add to inflationary pressures by putting the dollar at greater risk of a significant long-term decline.
For the complete article.
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Income Security Recommendation January 2013 Issue.
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