Tchir: No One Buys Treasuries Because Of The Rating

Authored by Peter Tchir via Academy Securities,

Nationally Recognized Statistical Rating Organizations (NRSRO’s), generally referred to (incorrectly) as Rating Agencies and their scores are usually not why anybody buys US treasuries.

US Treasuries are sometimes mandated immediately or included with different authorities backed debt in mandates.

The downgrade by Fitch is a non-event for yields.

It does play into our “hypothetical” query from a number of months in the past – “Will the sovereign ceiling apply to USD debt”?

Companies in different nations have problem reaching a score larger than the nation they’re domiciled in, however I think that isn’t related right here as that is largely a symbolic transfer.

Too a lot debt, debt ceiling negotiations and so forth. are points, so the downgrade is sensible, however it received’t have an effect on shopping for of treasuries.

One query I ask, not less than in my very own head, is what are the belongings of the US?

Not the flexibility to tax, however the worth of the land (nationwide parks), and issues like drilling rights.

Every firm is examined, from a credit score standpoint on their debt, their money move AND their belongings.

[ZH: USA Credit Risk has completely ignored the downgrade…]

I believe it is a non-event from a US market standpoint. Maybe some greenback weak spot, however even that looks as if a stretch.