Leaviss: The impact of the US downgrade on bond markets

BOND MARKET REACTS TO US DOWNGRADE

Jim Leaviss, head of retail fixed interest at M&G, discusses the impact on bond markets of S&P's downgrade of the US' credit rating.

Friday's downgrade of the US by ratings agency Standard & Poor’s appeared to come as a surprise to many market participants and commentators - even though the writing had been on the wall for some time. The downgrade affects more than $9trn – that’s 9,000 billion dollars – of American treasury bonds. S&P doubts the effectiveness, stability and predictability of the financial policy hammered out on Capitol Hill over the past week or so. In other words, investors can no longer assume Washington will honour its debts, whatever the market conditions. Standard & Poor’s has said the outl...