Municipal Bond Forum
Too soon to know effects to possible Treasury downgrade
Q
Since my account contains only state and local issues, there should be no negative impact if Treasury bills get downgraded from AAA, correct?
A
James A. Klotz responds:
It would be pure speculation to predict the ramifications of a U.S. Treasury downgrade on other securities.
Obviously, it would be difficult to conclude that if U.S. Treasury bonds were no longer of “AAA” quality, a state or local bond could be.
It is possible however, that there would not be a serious impact on how various securities trade if Treasury bills and bonds still remained the ultimate benchmark.
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