Forbes & Sierra Mutual Funds CIO on the Implications of Recent U.S. Bond Rating Downgrade
U.S. Loses Second Triple-A Bond Rating But Retains Its 'License To Be Irresponsible'
Treasury-bond yields were stable on Wednesday but edged up on Thursday, with the 10-year benchmark rising to 4.19% from 4.05% before the downgrade. Long-term U.S. yields are almost a percentage point below those of instruments with maturities of one year or less -- the so-called inverted yield curve -- a possible sign of an impending recession but certainly not an indicator of bond-market panic.
"When you're talking about the difference between triple-A and double-A, they're basically the same thing," says James St. Aubin, chief investment officer of $5.6 billion Sierra Mutual Funds. Fixed-income professionals feel they do a better job of predicting default risk by determining market interest rates than companies like Fitch can achieve with credit ratings.
The thoughts and opinions expressed in the article are solely those of the person speaking as of 8/4/2023. The discussion of individual companies should not be considered a recommendation of such companies by the Fund’s investment adviser. The viewer must make his/her own assessment of the relevance, accuracy, and adequacy of the information contained in this article, and make such independent investigations as he/she may consider necessary or appropriate for the purpose of such assessment.
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