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Chart of the Day: here's when Britain loses its triple-A rating
Thankfully, a triple-A rating is no longer essential for low government bond (gilt) yields.
by Chris Marshall on Mar 26, 2012 at 10:55
Despite chancellor George Osborne’s swaggering, the UK is only just clinging onto its cherished triple-A credit rating, the thin armour deflecting attacks from nasty market assailants.
Does the UK belong in the increasingly exclusive triple-A club?
This chart from Citigroup – whose economists describe the UK as a ‘relatively weak triple A’ – suggests our membership may be due to expire. This holds whether you consider the more optimistic forecasts from the Office for Budget Responsibility (OBR), the independent budget watchdog, or those from Citigroup.
But as the downgrade of the US last summer showed us, a triple-A rating isn’t essential for the low government bond yields that are allowing the government to borrow money cheaply; there are other forces at work.
‘We do not expect that a negative outlook – or indeed a ratings downgrade – would seriously derail gilts, given the sluggish economy and falling inflation, plus the government’s strong commitment to fiscal consolidation,’ commented the Citigroup economists in their research.
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