S&P Comes Out Negative on US Treasurys

Pimco’s Bill Gross was not only Ahead of the Curve this time, he kicked sand in the Curve’s face and stole its girlfriend.

All that talk about shorting treasurys and “unconstrained” bond funds and getting net short US debt in its flagship Total Return Fund has lead to this – a major ratings agency negative outlook on our sovereign debt.

Here’s Standard & Poors via MarketBeat:

Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable…

We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.

Mr. Gross is not likely pleased with today’s talk out of S&P, but he must certainly feel more than a little bit vindicated.  I personally doubt that S&P goes much further than jawboning – an actual ratings downgrade is probably not in the cards.  But still…



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