Thursday, 30 June 2016

The power of a ratings downgrade - the UK example

A peripheral issue in the Australian election campaign is the danger of a downgrade by those dreaded ratings agencies. Listen to some of the political talk and you would think that the danger of the Australian government losing its triple A status would send us to debtors prison because of higher interest rate.
I was intrigued this morning to look at what has happened in the UK since the post-Brexit downgrading of its credit rating. From London's Financial Times:

A decline in rates across the range!
From memory the same pattern of a government being able to borrow at a cheaper rate following a downgrading occurred in the United States.
The power of the ratings agencies indeed.
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