“A huge amount of fiscal risk is not priced into US bonds — the downgrade, the fiscal package, investors stepping away from lending the US government money,” said Kellie Wood, head of fixed income at Schroders Plc in Sydney. “The potential for a fiscal misstep is increasing.”
Bonds in Australia and Singapore are getting a lift as questions about the appeal of US Treasuries send investors toward top-rated alternatives.
Strategists and portfolio managers are re-examining whether Treasuries offer enough compensation, a rare challenge to the world’s largest bond market after a recent ratings downgrade and fears that a proposed tax bill may hit foreign investors. Taiwanese insurers are making plans to back away from dollar assets, while Hong Kong pension funds have been told to draw up contingency plans for a further downgrade of the US.
