Financial markets barely flinched when Fitch stripped the United States of its top credit rating, but it served as a reminder of longer-term structural risks investors in government bonds are yet to grasp.
The immediate focus in the aftermath of the Aug. 1 downgrade has been on U.S. governance, but Fitch Ratings also flagged higher rates driving up debt service costs, an aging population and rising health care spending, echoing challenges that reverberate globally.
David Katimbo-Mugwanya, head of fixed income at EdenTree Investment Management, a £3.7 billion ($4.71 billion) charity-owned investor, said that with the move reflecting elevated debt levels at a time when interest rates will likely remain high, debt sustainability was back in focus.