On Monday, August 08, S&P will announce the result of its ratings review on entities linked to the US government, such as housing finance agencies Fannie Mae and Freddie Mac. A downgrade is considered likely because S&P has emphasised the entities’ link with the sovereign rating in the past.
The odds are very high that there would be knock-on consequences of other borrowers getting downgraded – both corporate and public, in the US and overseas. What really ends up happening is a downward shift of the entire spectrum of fixed-income securities. Broader downgrades would be a signal to all types of investors to re-examine their risk appetite. '+'
