Cowley: US needs to decide on debt limit to avoid downgrade

The US government needs to make a decision on whether to raise its debt limit to fend off rating agencies in the light of Japan's downgrade, according to OMAM's head of fixed income Stewart Cowley.

Echoing the concerns of Bill Gross, manager of the $241bn PIMCO Total Return fund, who last week said the debate between Congress and Barack Obama’s administration will cause US treasuries to fall, Cowley urged Congress to raise its $14trn debt ceiling so it can meet interest repayments and avoid default. “It seems only a matter of time before the ratings agencies pounce on USA Plc. “It is unthinkable Congress will allow a default to happen as it would send the global financial markets into a spasm, which will make the banking crisis look like a minor stomach ache. “But then again,...