What An S&P Sovereign Debt Rating Is Worth
Via Dean Baker, a hill of beans:
Look at the chart - AAA S&P rated Australia's 10 year bonds are yielding 4.9%. A- S&P rated Malaysia's 10 year bonds are yielding 3.9%. AA- rated Japan's 10 year bonds, and currently holding a negative watch from S&P, are paying 1.1%. AA- China's 10 year bonds, currently S&P rated stable, are yielding 4.1%.
While as a general matter, the countries S&P has chosen to rate AAA face lower interest rates than countries with lower ratings, there is so much randomness that it is difficult to attribute any cause to S&P ratings. I think no one seems to pay attention to S&P on sovereign debt ratings. More . . .
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