HONG KONG : Asian stocks traded lower while U.S. Treasury yields declined on Wednesday, after ratings agency Fitch unexpectedly downgraded the United States' top-tier sovereign credit rating.
Fitch cut the United States by one notch to AA+ from AAA, citing fiscal deterioration, a decision announced after the Wall Street close on Tuesday."Most of the Asia turmoil this morning and the Treasury yields move is triggered by the Fitch decision," said Manishi Raychaudhuri, head of Asia Pacific equity research at BNP Paribas.
Investors counterintuitively fled to the relatively safety of sovereign debt from riskier equity markets. Treasuries, whose yields fall when prices rise, were also bought when Standard & Poor's cut the U.S. top"AAA" rating by one notch to"AA-plus" in 2011. While the investor reaction to the downgrade was relatively contained, it has injected some uncertainty into financial markets.
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