A large majority of companies holding U.S. Treasuries had "no intention of changing their holdings as a result of the S&P move [to downgrade U.S. credit rating to AA+]," according to a survey of members by the Association for Financial Professionals (AFP) AFP Survey-Reaction to U.S. Credit Rating Downgrade. The bigger impact, according to a quarter of respondents who are made up of senior level treasury and financial professionals, is the United States being viewed as a less desirable investment destination due to the downgrade.
Despite the debt ceiling debate, 79% of organizations that held Treasury securities during that time did not alter their holdings. Almost 13% slightly decreased, significantly decreased or completely liquidated U.S. Treasury holdings during this time. However, of those that held on to U.S. Treasuries, 15% indicated they do not plan on adding to those holdings.
So what do these pros believe the key short-term impact of the downgrade? Although 60% don't believe it will have any impact, 26% believe it will increase the cost of debt financing, 20% believe it will increase the cost of bank credit, 10% believe it will reduce bank credit availability and reduce access to debt financing. Finally, 7% believe it will increase the cost of raising equity and reduce ability to raise equity.
Long term, 75% don't believe this downgrade will have any impact, although 24% believe it makes the U.S. less attractive for investment, which could impact hiring and capital investment in the United States by these firms.