Despite being downgraded to AA+, the U.S. remains one of the strongest, if not the strongest, credit markets in the world. The cost of borrowing has reached record lows and the dollar remains the world’s preferred reserve currency. It appears the rating agencies are moving into politics – a game they have no business playing.
S&P Cut Proves Absurd as Investors Prefer U.S.
Four months after Standard & Poor’s
stripped the U.S. of its AAA credit rating and said the world’s biggest economy was no longer the safest of borrowers, dollar-denominated financial assets are doing nothing but appreciating. Government bonds have returned 4.4 percent, the dollar has gained 8.6 percent relative to a basket of currencies, and the S&P 500 Index of stocks has rallied 1.7 percent since the U.S. was cut to AA+ from AAA on Aug. 5. The cost for the nation to borrow has fallen to record lows since S&P said the U.S. was no longer risk-free, with the average monthly yield in November on 10-year notes below 2 percent for the first time since 1950.
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