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U.S. Outlook Revised to Stable by S&P as Fiscal Risks Recede




This will probably bring a big boast to sentiments. Continue to monitor the equities and higher yielding currencies to see if demand continues to increase. Risk aversion will probably reduce. Good reading from Bloomberg.

The U.S.’s AA+ credit rating outlook was increased to stable from negative by Standard & Poor’s, based on receding fiscal risks, less than two years after the world’s largest economy was stripped of its top ranking. The U.S. has a less than one-in-three likelihood of a downgrade in the “near term” with the revision, S&P said today in a statement. The New York-based company said it sees “tentative improvements,” such as the deal politicians reached to resolve what became known as the fiscal cliff and through spending cuts in the Budget Control Act of 2011. U.S. government debt as a percentage of gross-domestic-product will likely be stable at about 84 percent for the next few years, S&P said. This may “allow policy makers some additional time to take steps to address pent-up age-related spending pressures.” S&P, the world’s largest credit rater, cut the U.S. ranking from AAA in August 2011, contributing to a global stock-market rout and sending yields on Treasury debt to record lows as investors sought a refuge in the world’s most easily traded securities. Downgrades don’t necessarily correspond to higher borrowing costs. Yields on sovereign securities moved in the opposite direction from what ratings suggested in 53 percent of 32 upgrades, downgrades and changes in credit outlook last year, according to data compiled by Bloomberg on Moody’s and S&P grades. Improving Economy “The improving U.S. economy is boosting government revenues, the sequester has trimmed spending, and uncertainties about growth in China and Europe make the United States the preferred destination for global investors,” said Phillip Swagel, former Treasury assistant secretary for economic policy under the George W. Bush administration and now a professor at the University of Maryland . Yields on benchmark 10-year Treasuries dropped 0.74 percentage point in the seven weeks following the August 2011 […]


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