U.S. Risks August Downgrade If No Deficit Progress, S&P Says (alreadt downgraded! )

Posted on July 21, 2011
Filed Under Analysis_and_predictions, Business, Economy, Investment, Need_to_review_in_future, Political, essential_Information | Leave a Comment

U.S. Risks August Downgrade If No Deficit Progress, S&P Says
By John Detrixhe – Jul 21, 2011 11:26 AM CT source

Standard & Poor’s reiterated that the U.S. may lose its AAA credit rating as soon as August as the risk of a default escalates amid political wrangling to lift the debt limit while cutting the budget deficit.

The rating may be lowered to the AA+/A-1+ range with a negative outlook next month even if an agreement to raise the debt ceiling in time to avert a potential default without a “credible” plan to lower deficits, S&P said in a report today. The New York-based ratings company reiterated today that the chance of a downgrade is 50 percent in the next three months, as outlined when it placed the rating on “CreditWatch” for a downgrade on July 14.

The stepped-up pressure from S&P comes as U.S. Senate Majority Leader Harry Reid said the U.S. House’s decision to be out of session this weekend presents “a bad picture” to Americans as an Aug. 2 deadline nears for possible default. House Speaker John Boehner, an Ohio Republican, noted that the House has passed a proposal that would slash spending while conditioning a $2.4 trillion increase in the debt ceiling on passage of a constitutional amendment to balance the budget and make it more difficult to raise taxes. President Barack Obama has said he’ll veto the bill.

“The proposals seem too grand to get anything permanent done within this timeframe,” Ray Remy, head of fixed income in New York at Daiwa Capital Markets America Inc., one of 20 primary dealers that trade directly with the Federal Reserve, said in a telephone interview. “On the surface it looks good, but a temporary raise in the ceiling is not good.”

‘Gang of Six’

Yields on benchmark 10-year notes climbed seven basis points, or 0.07 percentage point, to 3 percent at 12:24 p.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent securities maturing in May 2021 dropped 20/32, or $6.25 per $1,000 face amount, to 101 1/32.

A bipartisan group of senators called the Gang of Six proposed a $3.7 trillion deficit-reduction plan that has been embraced by Obama. Some Republicans have endorsed it or signaled openness to considering it. Lawmakers are focusing talks on the so-called grand bargain as well as providing a short-term increase in the debt limit, according to Representative Steny Hoyer, a Democrat from Maryland.

The U.S. would be cut to SD, or selective default, if it missed a payment on its debt, S&P said again today in a report. The Treasury has said the government, which reached its $14.3 trillion borrowing limit on May 16, will run out of options to prevent a default on Aug. 2.

A deal to raise the U.S. debt limit in return for spending cuts and revenue increases that would be determined later may not persuade S&P to remove its negative outlook on the government’s AAA credit rating as the firm evaluates “the likelihood that an agreed plan will be implemented.”

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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7/15 Greece, Portugal Likely to Leave EU, Dumas Says

July 15 2011 (Bloomberg) — Charles Dumas, research director at Lombard Street Research Ltd., talks about Europe’s sovereign debt crisis and the outlook for the European Union. Dumas also discusses the results of the EU’s bank stress tests. He speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

Comments from Martin Chu:
(1) I did not forsee that Greece, Portugal Likely to Leave EC.
(2) In Charles Dumas’s last few seconds’s comments, he said US will be in deflation situation and so are all other nations. I would mark this statement and verify this in Year 2012!
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Default Or No Default, Dollar Gets Little Respectsource is from JULY 21, 2011, 10:40 A.M. ET Wall Street Journal Web edition.

-U.S. defaults, dollar falls; U.S. resolves, dollar falls

By Javier E. David
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–The dollar can’t seem to win for losing.

For weeks, the looming threat of a U.S. debt default hamstrung the greenback. Now, movement toward resolution of the debt crises on both sides of the Atlantic is being interpreted as positive for risk sentiment–which is undermining the dollar because of the currency’s low yield appeal.

Most analysts say a default on the U.S.’s $14.3 trillion debt would negate the dollar’s safe-harbor appeal. But even if the debt uncertainty lifts and high-yielding assets rally, the dollar’s biggest albatross will still be persistently loose U.S. monetary policy that the market doesn’t expect to change until next year at the earliest.

This is a problem because even with the euro zone’s debt woes, the European Central Bank remains steadfastly committed to higher interest rates to quell price pressures.

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Details about what the U.S. and Europe will do next to tackle their respective debt crises are still nebulous. But markets have reacted positively to a euro group draft resolution to Greece’s financial debacle, which analysts hope can prevent contagion.

Lewis says he’s bullish on the euro in part because euro-zone leaders are actively addressing the debt crisis, even though they are postponing a seemingly inevitable Greek restructuring.

Conversely, he contends the U.S. debate “has revealed significant political gridlock” that bodes ill for the long-term fiscal outlook. Lewis says that if the world’s largest economy were actually making convincing progress, “we would be seeing a meaningful dollar rally, but we’re not.”

Global sovereign debt concerns mean that investors are clearly rewarding what market observers like Lewis call “strong balance sheet countries,” including Sweden, Norway and Switzerland.

To be sure, the dollar remains the world’s premier reserve currency, as shown in 2008 when it rallied as traders sought shelter from a potential economic cataclysm during the financial crisis.

But situations such as the current one–where traders are reluctant to hold the greenback for long regardless of the circumstances–play into the decade-long dollar downtrend that has seen the currency shed nearly 40% against its major counterparts.

That has some analysts questioning whether the dollar will emerge unscathed should the U.S. default or get downgraded.

“There had been the open question of, if the U.S. had a short-term default, would the dollar rally again, or behave like a normal currency and sell off,” said Greg Anderson, senior foreign exchange strategist at Citigroup.

He says the currency wouldn’t rebound if there’s a default and ratings downgrade, estimating that a default could trigger a 5-10% drop in the U.S. currency over time. A short-term deal that soothes investors’ worries would only lead to a comparatively modest 1% fall, he says.

-By Javier E. David, Dow Jones Newswires; 212-416-4564; javier.david@dowjones.com

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This is from udn.com on June 30 2011 2011.06.30 02:59 pm
source: http://udn.com/NEWS/WORLD/WOR2/6430116.shtml

【聯合晚報╱編譯陳澄和/綜合報導】
posted on 2011.06.30 02:59 pm

如果美國政府未能提高舉債上限，並導致違約，標準普爾公司(S&P)將把美國的債信評等降到最低等級的D，而穆迪公司(Moody’s)則說會降到Aa。

歐巴馬政府與國會目前正積極協商削減支出與預算赤字的折衷條件，以便及時排除障礙，達成提高舉債上限的協議。財政部表示，目前的14.3兆美元上限，只能支應美國的債務到8月2日為止。

根據彭博資訊報導，標普公司的主權評等委員會主席錢伯斯29日接受訪問時說，美國如果違約，標普會把美國的債信評等從最高的AAA降到最低的D，但他也說：「我們相信舉債上限會提高，政府也不會違約。否則，我們便不會給予美國政府AAA的評等。」「事情的發展和我們預期相符。」穆迪公司則表示，他們可能會給予美國Aa的評等。

由於國會與政府的協商迄今仍僵持不下，衍生金融商品交易商如今都提高擔保國庫券違約的價格。指數管理公司Markit集團指出，擔保違約的費用已從5月16日美國達到借貸上限時的24個基點，升高到6月28日的51個基點。穆迪公司的信用主管海斯本月接受訪問時說，即使舉債上限只導致短暫的違約，美國可能也無法很快重返Aaa評等。標普早在4月就警告，除非同意在2013年以前執行削減預算赤字與國家債務計畫，美國將會喪失AAA評等。
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Let see what happen around August 2 2011 to see wherther US government is really serious about thier Monetary system and Us dollar value.
Or US just want to stay business as usual and push all problems to next generations and people and countries overseas!

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Martin Chu’s comment on Nov 1120 2011.
S&P already lower US Credit Rating.
Now is the time to monitoring US Budget and monertory policy.
Let us constantly check and monitor what US congress and Super 8 member Committee’s action (Both open and under table) to see what is going on!

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