Financial pros: Country strong, but...

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[1]. 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.

About the Author

In her many years covering the futures industry Ginger has interviewed some of today's best global hedge fund and commodity trading advisors. Ginger received a master's degree in journalism at Northwestern University's Medill School of Journalism and a bachelor’s in communication arts from the University of Wisconsin – Madison

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