“‘There are some things people shouldn’t worry about. This is one.’”
Billionaire investor Warren Buffett doesn’t sound too shaken up by Fitch Ratings’ decision earlier this week to knock its rating on U.S. government debt down to AA+ from AAA.
The downgrade prompted several market watchers to observe that investors aren’t driven to buy U.S. Treasurys based on the credit rating. Analysts didn’t expect the downgrade to result in any meaningful forced selling of Treasurys, noting that many major Treasury holders, such as funds and index trackers, had already prepared for the move by changing mandates to specifically refer to Treasurys rather than AAA credit.
See: What Fitch’s U.S. credit downgrade means for investors
As for Berkshire Hathaway Inc.
BRK.A,
BRK.B,
the downgrade won’t alter the conglomerate’s Treasury-buying plans one iota, Buffett told CNBC.
“Berkshire bought $10 billion in U.S. Treasurys last Monday. We bought $10 billion in Treasurys this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills, the Berkshire CEO and chairman said, according to CNBC.
Buffett said Fitch’s downgrade touched on legitimate concerns, but that it doesn’t change his views on Treasurys or the U.S. dollar. Fitch on Tuesday cited an “erosion” of governance and the nation’s expected fiscal deterioration over the next three years in delivering the downgrade, which came more than a decade after rival ratings firm S&P Global became the first to strip the U.S. of a AAA rating.
Treasury yields
BX:TMUBMUSD10Y,
which move in the opposite direction of price, rose Wednesday and Thursday, as investors weighed the downgrade alongside economic data and plans by the Treasury Department to issue a deluge of debt in the third quarter.
See: How Fitch downgrade might impact Treasury’s $1 trillion third-quarter borrowing plans
Stocks declined as Treasury yields rose, with the S&P 500 falling for a third straight session Thursday. The Dow Jones Industrial Average
DJIA
fell around 67 points, or 0.2%, while the S&P 500
SPX
shed 0.3%.
Meanwhile, Buffett’s fellow billionaire investor, Bill Ackman, said in a late Wednesday post on the site formerly known as Twitter that he was shorting 30-year Treasury bonds
BX:TMUBMUSD30Y
“in size” partly due to expectations for exploding budget deficits in the U.S. over the next decade, which should yield a deluge of issuance on the longer end of the curve.
Read: ‘We are short in size’: Bill Ackman bets against 30-year Treasury bonds after Fitch downgrade
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