Bonds Strong Despite the Fitch Downgrade

Today’s video is a follow-on from last week. In my last video, I talked about how Fitch downgraded US credit from a AAA to an AA+. At some level, it’s obvious. But, then I found a chart to look at how ratings are throughout the world to get some perspective here.

One of the reasons I did this is because we had a large auction of 10-year treasury notes. What that means is that the US auctioned off $38 billion dollars worth of treasury notes, which basically means they borrowed $38 billion from investors.

There was a big question on what the investors would think about that. It went over a bit better than some of the other recent ones – it was met with surprisingly good demand. Which led me to take a closer look at it.

Looking at the Chart

On this chart, the darker the green means the better the credit rating. The US and Canada are both AA+ rated. Only Australia and a couple of Nordic countries are still AAA rated.

One thing that is noteworthy is: if you are looking for a safe haven to put your money and have it invested, then what are your options? Based on the colors on this chart, you don’t want to put it into South America or Africa. China is the second-biggest economy in the world, and it still has a significantly lower rating than the US.

This information shows that the US is still relatively safe compared to the other options around the world. Then, it begs the question: why not Australia? Well, Australia doesn’t really have much debt, which means you probably can’t get enough if you are looking for a safe haven for some of these big amounts – other countries who are looking to invest a lot of money.

US Investments are Still Safe

I wanted to point out that even though the US got downgraded, it’s not the end of the world. I believe that they deserved it. I think if some of these politicians don’t get their stuff together, then it will probably continue to go down. But I still believe, as it’s been for a very long time, the US is still a safe haven. It’s still the safest place to park your money. It’s the lowest chance of default.

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