Two leading credit rating companies have cautioned the U.S. on its credit rating, expressing concern over a deteriorating fiscal situation that they say needs correction.The warnings issued Thursday echoed prior statements by the companies, however, and financial markets largely ignored them.
"My traders are shrugging it off as stuff we've heard before," said Tom Di Galoma, head of interest-rate trading at Guggenheim Partners in New York.
U.S. Treasury bond prices fell slightly in early trading on Thursday, but largely because traders were selling ahead of an afternoon auction of 30-year bonds. The 10-year Treasury note's yield, which moves in the opposite direction of price, was at 3.367% late morning in New York from 3.353% on Wednesday.
In the credit-default swap market, where investors buy insurance against a possible default, it costs $42 ,000 to insure against default of $10 million in five-year U.S. debt , according to data provider Markit. By comparison, such insurance for Germany is $60,000 and for Greece is $958,000.
"Rating agency warnings about a potential U.S. downgrade or the need for the U.S. to reduce spending are not exactly new, and the markets have in the past not reacted dramatically to these warnings," said Markit analyst Otis Casey.
Moody's Investors Service said in a report that the U.S. will need to reverse an upward trajectory in the debt ratios to support its triple-A rating.