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"The risk of a downgrade is exacerbated every time Congress flirts with the debt ceiling," said Calvin Norris, Portfolio Manager & US Rates Strategist at Aegon Asset Management, who sees another downgrade as still a risk. Economic damage from the 2011 and 2013 debt ceiling battles had a chilling impact. Rating agency Fitch and other smaller agencies recently placed the U.S. credit rating under review. Reuters GraphicsCASCADE EFFECTInvestors use credit ratings as one of the metrics to assess the risk profiles of governments and companies. In the 2013 debt ceiling crisis the legislative standoff did not cause a rating downgrade, although Fitch placed its rating under review.

Persons: Kevin McCarthy, Joe Biden, Leah Millis, Calvin Norris, Wendy Edelberg, Edelberg, Fitch, William Foster, ”, Andy Sparks, Olivier d'Assier, Peter Crane, MSCI's Sparks, Davide Barbuscia, Megan Davies, Nick Zieminski Organizations: U.S, White, REUTERS, Senate, Republicans, Aegon Asset Management, AAA, Government, Office, The, Brookings Institution, Moody's, Moody’s Investors Service, Applied Research, Crane, Treasury, Thomson Locations: Washington , U.S, U.S, United States, Washington, APAC, Qontigo

☆ What Would Happen if the U.S. Defaulted on Its Debt
▼ + stars: | 2023-05-18 | by ( Joe Rennison | ) www.nytimes.com time to read: +1 min

The U.S. debt limit has been reached and the Treasury Department is finding ways to save cash. After it runs out of maneuvers, what once seemed unfathomable could become reality: The United States defaults. The far-reaching effects are hard to fully predict: from shock waves in financial markets to bankruptcies, recession and potentially irreversible damage to the nation’s long-held role at the center of the global economy. The probability of a default remains low, at least based on opposing lawmakers’ assurances that a deal will be done to raise or suspend the debt limit and the long odds implied by trading in certain financial markets. “We are sailing into uncharted waters,” said Andy Sparks, head of portfolio management research at MSCI, which creates indexes that track a wide range of financial assets, including in the Treasury market.

☆ ‘It’s not zero.’ Wall Street is pricing in a small but growing risk of a disastrous US default
▼ + stars: | 2023-03-31 | by ( Matt Egan | ) edition.cnn.com time to read: +6 min

As politicians sleepwalk toward a potential debt ceiling crisis, financial markets have begun pricing in a small — but growing — chance of a disastrous default. “The probability of default has gone up noticeably,” Andy Sparks, head of portfolio management research at MSCI, told CNN in an interview. Yellen has used unusually strong language for a former central banker to warn Congress against messing with the debt ceiling. Asked about MSCI’s estimate of a 2% implied probability of a default, Valliere said that number is low. But this is not a typical debt ceiling debate.”Fallback optionsThere are some early indicators of concern popping up in the bond market.

☆ Analysis: Global bonds move in lockstep, ramping up investors' risk
▼ + stars: | 2022-10-11 | by ( Davide Barbuscia | ) www.reuters.com time to read: +5 min

As a result, we’re seeing significantly elevated correlations between bond markets," said Andy Sparks, head of portfolio management research at MSCI. "The high level of correlation across global bond markets means that allocating to ex-U.S. bonds is that much less effective," said Gregory Peters, co-chief investment officer at PGIM Fixed Income. Peters doesn't expect the correlations to moderate until central banks' monetary policies diverge significantly, and he has reduced his exposure to sovereign bonds outside the U.S. "That's something that brings these global issues on U.S. investors' radars, because they are becoming first order market drivers." Martin Harvey, portfolio manager of the Hartford World Bond Fund, expects monetary policy regimes to start diverging next year.

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