U.S. to Get Downgraded Amid Fiscal ‘Theater,’ Pimco Says
http://www.bloomberg.com/news/2012-10-17/u-s-to-get-downgraded-amid-fiscal-theater-pimco-says.html
The sovereign credit rating of the U.S. will be cut as fiscal theater plays out in the worlds biggest economy, according to Pacific Investment Management Co., which runs the worlds largest bond fund.
The U.S. will get downgraded, its a question of when, Scott Mather, Pimcos head of global portfolio management, said today in Wellington. It depends on what the end of the year looks like, but it could be fairly soon after that.
The Congressional Budget Office has warned the U.S. economy will fall into recession if $600 billion of government spending cuts and tax increases take place at the start of 2013. Financial markets are complacent about whether the White House and Congress will reach agreement on deferring the so-called fiscal drag on the economy until later next year, Mather said.
In a base case of President Barack Obama being re- elected and Congress becoming more Republican, there is a high likelihood an agreement doesnt happen in a nice way, and we have disruption in the marketplace, he said.