Friday 5th August 2011 4 Comments
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One of New Zealand's biggest institutional investors has questioned how long the United States Government can continue to justify top international credit ratings on its Treasury debts.
"It doesn’t look like the American federal government’s AAA credit rating on its Treasury debts can be justified for much longer," Tower Investments chief executive Sam Stubbs said.
"July was another month of threatened sovereign debt crisis narrowly averted,” he said.
Political brinksmanship in Washington had "clobbered" sharemarkets internationally as investors became nervous over the possibility that the US might stop paying its debts.
The US could lose its top-notch credit rating in the next few weeks if lawmakers fail to increase the country's debt ceiling, forcing the government to miss debt payments, Moody's Investors Service warned on Wednesday.
Some big rating agencies last month placed the US key credit ratings on review for a possible downgrade, if there was a default on US Treasury debt obligations, as politicians argued over raising the nation's legal debt limit of $US14.3 trillion ($NZ16.8 trillion), which it reached on May 16.
"No one knows quite how much of a disaster the looming credit downgrade of the American government’s IOUs could inflict on financial markets, but the $US14 trillion US Treasury bond market is the single largest security market in the world," Stubbs said.
The bonds were held by banks, pension funds, corporates and insurers such as his own company, as the benchmark in "safe" securities.
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