Warren Buffett Stays Unfazed by Fitch's Rating Downgrade

Warren Buffett, the billionaire investor and CEO of Berkshire Hathaway, remains unfazed by Fitch Ratings' recent decision to downgrade the rating on U.S. government debt from AAA to AA+. Despite this downgrade, investors are not swayed to purchase U.S. Treasurys solely based on credit ratings.

Market analysts are confident that the downgrade will not lead to any significant forced selling of Treasurys. Many major Treasury holders, including funds and index trackers, had already adjusted their mandates to specifically include Treasurys rather than relying on AAA credit ratings.

In light of this situation, Berkshire Hathaway Inc. (BRK.A, +0.18% BRK.B, +0.19%) will continue with its Treasury-buying plans. Warren Buffett himself confirmed that Berkshire recently purchased $10 billion in U.S. Treasurys and intends to invest another $10 billion in the coming weeks. The only decision left is whether the next investment will be made in 3-month or 6-month T-bills.

Warren Buffett's calm approach reflects his confidence in the stability and value of U.S. government debt, reassuring investors that there is no cause for concern.

Buffett's Response to Fitch's Downgrade of Treasurys and the U.S. Dollar

Warren Buffett, renowned investor and billionaire, expressed his perspective on Fitch's recent downgrade of U.S. Treasurys and the U.S. dollar. While acknowledging the valid concerns raised by Fitch, Buffett remains steadfast in his view on Treasurys and the strength of the U.S. dollar.

Fitch's downgrade highlighted the "erosion" of governance and the projected fiscal deterioration of the nation over the next three years. This downgrade follows an earlier move by rival ratings firm S&P Global more than a decade ago, when they stripped the U.S. of its AAA rating.

In response to the downgrade, Treasury yields (BX:TMUBMUSD10Y), which tend to move inversely to prices, experienced an increase on Wednesday and early Thursday. Investors analyzed the impact of the downgrade alongside economic data and the Treasury Department's plans to issue a significant amount of debt in the third quarter.

The rise in Treasury yields led to a decline in stock market performance, with both the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) experiencing consecutive sessions of losses. The DJIA dropped 62 points, or 0.2%, while the SPX fell by 0.3%.

Another prominent investor, Bill Ackman, joined the conversation by announcing his short position on 30-year Treasury bonds (BX:TMUBMUSD30Y). Ackman cited expectations for the U.S. to face exploding budget deficits over the next decade, resulting in a flood of new bond issuances at the longer end of the yield curve.