Ratings are very important in any economy because it is the indicator of many investors to judge whether their investments are going to yield some returns. There are three (3) major credit rating agencies all over the world. These are the Moody’s, the Standard & Poor as well as the Fitch. Both the S&P and Fitch use a letter system for rating different economies. The highest rating is AAA or Triple-A, which indicates that an economy or market is reliable and stable. Recently, Fitch announced that it is going to place the sovereign debt of Britain on a negative outlook. Implicitly, what this means is that the likelihood of downgrading the rating of the country from AAA is likely.
In this regard, there were so many gnashing of teeth as well as wailing in the past weeks due to this. This is because having a downgraded rating can affect the other spheres of the market like in share trading as well as CFD trading and even spread betting. One direct effect of this is the sudden rise in the yield of British government bonds o the ten-year scheme, which means that more and more traders are selling their British debt or bonds.
However, are the people only overreacting? Well, this is a possibility. This is because economic analysts defend that this must be viewed in a wider perspective. Yes, it is true that it might affect the borrowing costs and the rise on yields is really steep, it must be noted that the rise is still low if it will be compared to historical data.
Further, the effects on the yields of bonds as well as share trade, CFD or spread betting shall also be contextualized and analyzed together with the other sovereign bonds and markets the United States and Germany. In this regard, the yields on US and German bonds also rose sharply in the past weeks as many investors sold them. However, the trend was on a positive note. Investors are hoping for an economic recovery soon so they are shifting share trading instead of dealing with bonds. With that, people must understand that some market happenings shall be viewed with wider eyes.