Has the Market Already Downgraded U.S. Triple-A Rating?

Highlighting the risk of growing U.S. budget deficits, a Bloomberg article this weekend noted that 2-year notes sold by the Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.a) (NYSE: BRK.b) in February yield 3.5 basis points less than U.S. Treasuries of a similar maturity.

A former Lehman Brothers chief fixed-income strategist Jack Malvey called the event "exceedingly rare."

Given that Berkshire Hathaway lost its Triple-A rating in February, the yield discrepancy highlights the significance of this event.

A number of rating agency have recently raised warnings about the U.S.'s triple-A rating, although none see an imminent debt downgrade.

Yesterday's passage of the health care bill could move the rating agencies to re-evaluate their ratings.

A debt downgrade would be detrimental to the U.S., as it would raise the cost of borrowing and would further weaken investor sentiment at a time when massive deficits as seen for years ahead.

Procter & Gamble (NYSE: PG), Johnson & Johnson (NYSE: JNJ) and Lowe's (NYSE: LOW) also have debt that has traded at lower yields that Treasuries in recent weeks.

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