Skip to main content

Default seemingly averted, but downgrade almost certain

The latest noises from Washington suggest that politicians are close to reaching a compromise on a deal that will raise the debt ceiling ahead of Tuesday night, thereby preventing a debt default and a government shutdown. This might prompt a short-lived relief rally in risk assets. However, the reported size of the deficit reduction package is very unlikely to prevent America from losing its AAA credit rating. The only question is therefore whether S&P and the other rating agencies pull the trigger this week or wait a little longer. Either way, though, we stand by our long-held view that 10-year Treasury yields will fall to 2.5% by the end of the year and stay there for some time. 

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services


Get access