Shane Solly: Harbour Asset Management spokesperson on what Moody's downgrade of US Government debt ratings means

Moody's cut the US credit rating by one notch, citing rising debt and interest payments that outpace those of similar sovereigns. 

The downgrade to 'Aa1' from 'Aaa' follows a change in the outlook on the sovereign in 2023 due to wider fiscal deficit and higher interest payments, according to new data.

Harbour Asset Management's Shane Solly explains further.

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Episode Transcript

Speaker 1 (00:00):
Shane solely harbor Asset Management is with us. Now, Hey Shane,
good evening here and well thank you. So what does
this credit rating downgrade mean for investment markets?

Speaker 2 (00:09):
Yeah, so Moody's one of the credit agencies that talks
about how good a lender borrowers. Cut the US credit
rating from triple A to A one. That's on concerns
about ballooning US Ditton deficits. Now, they talked about successive governments,
not the current government, but pretty much the current government's
added to the fuel to the fire in terms of

(00:30):
trying to get extending tax cuts, and they've got to
fund those tax cuts with more funding. So we certainly
see that trigger a bit of an increase in long
term government bond yours. This is what governments pay to
borrow to fund their activity. So we've actually seen those
rates increase over last week or so in advance of
this funding extension for US tax cuts. Locally has had

(00:53):
a bit of an impact, a little bit of impact
on our market. We've seen our New Zlan government bond
youards go up to four point seven percent recent high.
Our sheher market was down one point two percent. Wouldn't
be surprised to see a bit more volatility tonight off
the back of the credit rating, but it was coming.
It was just a matter of time.

Speaker 1 (01:09):
A little bit of mixed economic data here back back
here in New Zealand today, what's going to happen with
the Reserve Bank cutting the official rates.

Speaker 2 (01:16):
Yeah, So we had a couple of data points today. Firstly,
the New Zealand Services Industry contracts. It talks about services
companies how they're feeling, and it was week for third
month in a row at forty eight point six, when
the index is below fifty eight, men's businesses are actually
moving backwards, so it's telling us there's still pretty tough
times the services set. On the other hand, we had
prices paid. This is what we had to put into

(01:39):
buying goods and services for businesses up two point nine
percent for the quarter. But prices we actually we were
able to put out. We're only up two point one
so the companies had to we weren't able to pass
through all the higher prices. Now, Reserve Bank, it's a
bit of a tough setup for them. The economic data
says we should be cutting rates, and indeed inflation data

(02:01):
suggests they're still in the band but maybe it's not
enough for them to really open the taps up on
the twenty out. That may they'll cut, but maybe not
as much as we'd all like.

Speaker 1 (02:09):
All right, hey, and what we've got the budget coming
up on Thursday? Obviously, what are investors expecting.

Speaker 2 (02:14):
Yeah, look, we expected to be prudent, you know despite
this week economic outlog, which means lower tax tape. It
means the government's going to have to work harder in
terms of making sure they get some spending cuts through.
Markets are going to be focused on the degree of
debt issuance. How much money does the government have to
to raise to keep the halls of government going. The

(02:36):
expectations are forty to forty two b and gross. That's
a gross number, doesn't include some netting off. And if
they can come in that range, that will actually be
a good thing. Markets might like that. They'll be able
to scrutiny around infrastructure, housing, and healthcare policy in terms
are laying up for the future, and maybe a little
bit interested in that. QUI say, the change is potential
and so the change there brilliant stuff. Shane.

Speaker 1 (02:58):
Always good to talk to you. It really appreciate it, Shane.
So Harborresset Management.

Speaker 2 (03:01):
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