US joins China, Spain in double-A club

The category covers giant economies, oil-rich Arab states and nations truggling with debt. The good news: The top rating can be regained.

By RPrichard Aug 8, 2011 1:44PM

By MarketWatch

After losing its coveted triple-A credit rating, the U.S. has joined the ranks of sovereign borrowers sporting a double-A stamp that includes China and Spain.


The double-A club is a diverse group that includes countries wrestling with their own debt crises or, in China’s case, flush with cash. And it’s one from which some nations have moved up.


MarketWatch logoDouble-A is categorized as "high quality" and includes the No. 2 and 3 economies in the world, China and Japan, which rely heavily on U.S. consumers to buy their products. It’s worth noting that Japan has never missed a debt payment and that China is the U.S.’s biggest foreign creditor.

Other double-A borrowers include Belgium and Spain, the latter struggling with surging borrowing costs, as well as the oil-rich states of Saudi Arabia and Kuwait.


Israel and Taiwan, nations that rely heavily on the U.S.’s military muscle for their security, are also on the list.


For the U.S., which was downgraded by Standard & Poor’s in the wake of the political battle over raising the debt ceiling and reducing federal spending, there are reasons to be optimistic -- five, to be exact:


Australia, Canada, Denmark, Finland and Sweden all have, at one time or another, lost their top-notch ratings before working their way back into triple-A.


Standard & Poor’s and Moody’s had both put the United States on notice in July, warning of a downgrade because of the debt-limit crisis.


Although the debt ceiling was lifted, a downgrade by one or more agencies still seemed likely.


While provisional Fitch and Moody’s reaffirmations of a triple-A-rated U.S. soothed some jangled nerves, Standard & Poor’s, which had been most strident, was the one to watch.


The S&P downgrade could be expected to weaken the U.S. dollar by "at least another 2% to 5%," according to Kathy Lien, a director of global research and analysis at GFT. The greenback has been sinking against several major counterparts, most notably the Japanese yen and the Swiss franc.


Interest rates are also expected to rise by about 50 basis points on short-term rates and double that on the long end, S&P said.


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