This story may not have received much attention in this province or country but it may be a signal of something worthy of our attention.
The US government’s credit rating was downgraded this week. It fell a notch from AAA to AA+ in the eyes of one of the three major credit rating agencies. This is only the second time the US has endured a downgrade. The last one came about 10 years ago after another of those fights over the American government’s debt ceiling.
The agency says continued public sector borrowing at all levels in the US is behind their decision.
Canada has not seen a similar move yet but Saskatchewan’s rating was reaffirmed this week as we are now running surpluses. But Ottawa’s persistent deficit spending is no doubt catching the eye of the rating agencies and investors.
When governments need to borrow, they issue bonds and, if their risk profile rises because of growing debt, they have to raise the interest rates on those bonds to attract investors…rates that are also a benchmark for rising mortgage rates.
