Michael Zezas: How Will the U.S. Credit Downgrade Affect Markets?

This podcast episode examines the effects of the U.S. credit rating downgrade by Fitch to AA Plus from AAA. It argues that in the short term, it likely won't have a substantial impact on bond demand. The downgrade does not provide new information about U.S. debt and deficits or about inflation, which are key factors influencing bond prices. Besides, the primary holders of U.S. treasuries are not obligated to change their treasury holdings based on the credit rating downgrade. Investors should focus on the U.S. macro debates, such as inflation and the Fed's ability to contain it without causing a recession, rather than the downgrade.