UK At 80% Risk Of Rating Downgrade On Current Debt
The U.K. government faces an 80% chance of a credit
rating downgrade if its deficit reduction plans remain as they are, Scott
Mather, Pacific Investment Management Co.'s head of global portfolio management
told Dow Jones Newswires Tuesday.
Mather also said yields on U.K. government bonds - known as gilts - could
rise by as much as 100 basis points when the Bank of England's bond-buying
program ends,
Asked if the U.K. faced a serious risk of suffering a downgrade to its credit
rating, Mather said "I think so."
"It's just a question of when on the current trajectory, not if," Mather
said. "Based on what we know today about the debt trajectory and about the
inability to adjust that, I think it's greater than a 50% likelihood for sure.
Call it more like 80%."
Mather said the government's debt reduction plan "is lacking in conviction
and it is lacking in details."
He also said the end of the Bank of England's bond-buying program will have a
significant impact on U.K. gilt markets and borrowing costs.
"Common sense would tell you that if you had a buyer in the market place
which was taking the majority of the sector repeatedly... and then they
disappeared, ...you would expect a reprising, and it could be quite
significant," he said in a telephone interview.
"The estimates vary. They're really all over the map, but it could be 50
basis points, it could be 100 basis points, in that range."
PIMCO runs the Total Return fund--the world's biggest bond fund. |
