US Credit Rating Downgraded

FISMA

It what is sure to be an exciting Monday exchange, the credit rating of the US has just been downgraded for the first time in history.

Bad news always comes on the weekend when you cannot sell.

For younger investors, this is why people often dump their positions on Friday and buy again on Monday.

It is even worst during hurricane season! Politicians love hurricane season in the States: all the news is focused away from them.

If I remember, the S&L calamity occurred on a weekend during a hurricane. Fnm and Fre were taken over on a Friday in the after hours.

Now, on a weekend, the credit rating of the US is downgraded for the first time in history.

Any young economists out there should be all over this Monday. What happens to the price of Gold? Will Silver follow as a precious metal or fall as an industrial metal. What's going to happen to interest rates? If if costs the States more to borrow, are interest rates for mortgages going up?

It is going to be fun on Monday. Get those stop losses in! My max pain is 3.2%

Slan

andrew

moved to investments. While there's probably room for a thread on this topic in economics, this one seems more investment orientated. Please read the forum charter in order to understand what's appropriate for the Economics forum

Jim2007

FISMA wrote: »

For younger investors, this is why people often dump their positions on Friday and buy again on Monday.

Which is why people should learn the difference between speculating, trading and investing!

Jim.

gizmo555

FISMA wrote: »

IAny young economists out there should be all over this Monday. What happens to the price of Gold? Will Silver follow as a precious metal or fall as an industrial metal. What's going to happen to interest rates? If if costs the States more to borrow, are interest rates for mortgages going up?

It is going to be fun on Monday. Get those stop losses in! My max pain is 3.2%

Slan

Very hard to anticipate what may happen. The strong likelihood of a downgrade was very widely flagged, so you'd imagine it was to a great extent already priced in. Anyway, if equities sell off, where will that cash go? Into the newly downgraded bonds? As CNBC's John Carney tweeted - Can't wait for headline: Treasuries Rally As Investors Flee to Safety Following Downgrade.

SBWife

It may very well be a case of sell on the rumour buy on the news. As noted the downgrade has been well flagged. Treasury yields fell all week US sovereign debt is still seen by investors as a port in a storm regardless of what S&P et al. have to say.

What I'm interested in seeing is how do other Sovereign bonds react - in theory a downgrade of the rating on the benchmark results in an effective upgrade for everyone else. Will we see a contraction in yields across the board? And if so will it result in a movement towards some of the higher quality equities as investors get their heads around risk and start to look for some return?

later12

Other sovereigns will likely react with a mixed bag, since there is a lot more to respond to than the US downgrade, i.e. the ECB SMP program for Italian debt, which would cause some sort of rise in the value of European bonds in itself, but a rally may be affected by this downgrade.

We're really looking at a layer of events here, oh that the market moves could be so clear cut!