Investment rules that apply to some asset managers require them to hold only triple-A rated debt. If rating agencies downgrade the U.S., this will trigger a sell-off in Treasuries, leading investors to triple-A corporate bonds, such as those from Microsoft, Johnson & Johnson and Exxon Mobil.
To be sure, some experts wonder if a downgrade to the U.S. government would lead to downgrades of American companies. But so far, it appears that stellar corporate earnings (excluding financial corporations) have made the corporate bond market an attractive place for some portfolio managers.
"Net income growth is about 20% for those in the S&P (excluding financials) that have reported, " a portfolio manager at Columbia Management in Minneapolis told Reuters on Wednesday. "The best place to be right now is corporate bonds. Of course you have to pick your spots, and where we're not generally investing is financials."
The business lobby has entered the debt ceiling debate at the 11th hour with only a whimper, considering the stakes of a default for corporations.
