M&G's Leaviss: The impact of the US downgrade on bonds

Friday's downgrade of the US by ratings agency Standard & Poor’s appeared to come as a surprise to many market participants and commentators - even though the writing had been on the wall for some time. The downgrade affects more than $9trn – that’s 9,000 billion dollars – of American treasury bonds. S&P doubts the effectiveness, stability and predictability of the financial policy hammered out on Capitol Hill over the past week or so. In other words, investors can no longer assume Washington will honour its debts, whatever the market conditions. Standard & Poor’s has said the outl...