“The UK looks vulnerable,” Nick Gartside of JPMorgan Asset Management told the Financial Times. “In terms of its rating and its safe haven status it is an anomaly.”
Moody’s and Standard & Poor's, which have both rated the UK at triple-A since 1978, declined to comment.
While affirming its stable outlook on the UK in April, Standard & Poor’s warned that “materially weaker economic growth than we currently anticipate over the medium term” could lead to “downward pressure” on the rating.
The agency forecast growth of 0.5 percent this year—a figure that will now be hard to hit.
Investors said, however, that any downgrades were unlikely to have a major effect on the UK’s borrowing costs thanks to the Bank of England ’s bond buying program and its status as a haven in the European debt storm.
Standard & Poor’s decision to strip the US of its triple A rating last year did not dent investor appetite for Treasuries, whose yields have steadily declined.
The UK’s own two-year borrowing costs slumped to a record low of just 0.05 percent after the economic data were released. “As long as UK policy makers retain their credibility—and I think they will—then I don’t see why a downgrade would have an effect,” said Mike Amey of Pimco.
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