Investors aren’t selling Treasuries “mindlessly” after Standard & Poor’s cut the long-term U.S. credit rating from AAA, according to Peter Fisher, head of fixed income at BlackRock Inc.
The decision by S&P is a “warning shot” to investors and politicians, said New York-based Fisher, whose company is the world’s biggest money manager, in an interview on Bloomberg Television’s “InsideTrack” with Erik Schatzker.
Treasuries rallied, erasing an initial decline sustained in response to the S&P downgrade following the close of markets on Aug. 5. The yield on the two-year U.S. note dropped to a record low 0.24 percent on demand for a refuge. Futures on the S&P 500 Index expiring in September slid 2.4 percent.
Bond volatility isn’t as bad as some may have seen, said Fisher, 55. U.S. government debt securities remain the most liquid and transparent investments, the former Treasury Department undersecretary said in a phone interview.
S&P lowered the top AAA credit rating for the U.S. for the first time following the close of markets on Aug. 5, criticizing the nation’s political process and saying lawmakers failed to cut spending enough to reduce record deficits.
The ratings company dropped the U.S. long-term ranking one level to AA+ after warning on July 14 that it would reduce the rating in the absence of a “credible” plan to lower deficits.