USA 'could lose AAA rating'

The US could lose its coveted AAA credit rating, the manager of the world’s largest bond fund has warned.

Bill Gross said that the public balance sheet of the world’s largest economy remained weak, meaning that its government could become less credit-worthy in future.

The comments follow yesterday’s announcement from Standard & Poor’s (S&P) that the UK’s AAA rating on its sovereign debt had been put on ’negative’ outlook.

Britain, like the US, is seeing a marked deterioration in its public finances due mainly to a fall in tax revenue brought on by the financial downturn.

Ratings downgrades generally make it harder for a government to sell bonds - meaning that it could be forced to make swingeing tax hikes and reductions in public spending in order to meet debts.

This would in turn put a major block on economic growth and increase risks of a currency collapse.

Mr Gross, manager of Pimco’s Total Return fund, was quoted by news agency Reuters as saying: ’[The US is] going the way of the UK - losing [the] AAA rating which affects all financial assets and the dollar.’

The expert added that the downgrade would come in ’at least three to four years, if that’.

Referring to the recent sell-off in the dollar, Mr Gross also said that ’the market will recognize the problems [in the US] before the rating services’.

The Pimco Total Return fund has over $150 billion of assets under management.ADNFCR-2318-ID-19183369-ADNFCR