STANDARD AND Poor’s has said it was an “oversimplification” to blame market volatility on its stripping the US of its top AAA sovereign rating, and that many observers agreed with the step.

Markets were also responding to a weaker global growth outlook, David Beers, global head of sovereign and international public finance ratings at S&P, told reporters in Singapore yesterday.

The company was untroubled by dissenting views on its decision, he said in response to questions.

Instead of falling in value after S&P said the US was less creditworthy, treasuries rallied and the government’s borrowing costs fell to record lows. While stocks fell, wiping $2.5 trillion (€1.75 trillion) from the market value of global equities on the first trading day after S&P cut the US by one level to AA+, the gain in benchmark 10-year government notes sent yields down almost a quarter percentage point to 2.32 per cent.

Treasuries have outperformed since the announcement, earning investors 1.62 per cent, including reinvested interest, according to Bank of America Merrill Lynch’s U.S Treasury Master Index. By comparison, the company’s Global Sovereign Broad Market Plus Index shows a 1.31 per cent return.

Mr Beers’s comments follow criticism including from Warren Buffett, the world’s most successful investor, who said the US should be “quadruple-A” and that the decision did not reflect any inability of the US to pay its debts.

“It’s at the very least an oversimplification to say that all this is happening because of SP’s change of opinion,” Mr Beers said.

Amid evidence of a slowing world economy, “markets digesting all the news have concluded that the near-, perhaps medium-term, outlook for global growth has become less certain. This was all happening before the downgrade and has continued after some of the noise around the downgrade,” he said.

The Obama administration blasted S&P at the time, with the Treasury Department telling the company it had overestimated future national debt by $2 trillion. S&P said the discrepancy did not affect its decision.

The US growth trajectory faces downside risks, and US medium-term fiscal adjustment may be affected by a slowdown, Mr Beers said yesterday. An AAA rating for the US is not likely in the near term, he said. – (Bloomberg)