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No Keith that is wrong. Peter is telling you facts not opinion.
Osborne was wrong to place a massive emphasis on just retaining the AAA rating, specially as it is not under his control and the economic inheritance he had made its retention somewhat dubious anyway. Politician talk is not good economic talk. As Peter said, the damage was done when the AAA rating went to a negative outlook as bonds are being priced accordingly. Right now though, the interest paid by the government on UK bonds still look a significantly better bet than most other developed countries largely because Osborne's economic strategy. This is important because these bonds are funding the deficit.
Government bonds (also known as gilts) are meant to provide a 'safe haven', exceptionally low capital risk for which you get a defined but low, known, interest rate. These are often used in portfolios to provide bottom end protection or to cover known risks, 15 year gilts are used to establish and underpin annuity rates. These bonds have a capital value and are traded on the markets.
Investors buy these bonds and judge their worth based on a risk/return calculation. Duration and yield are very important factors in this respect. The credit rating of the issuing agency, in the case of these it is the government, is important. An AAA positive rating means that an investor will get a lower interest rate for his investment (paid by the government out of our taxes and part, these days, of the deficit) than an AAA negative rating or an AA rating. Higher interest rate paid by the government means a higher deficit and the need for more spending cuts.
At present I consider (as do many investment experts) longer duration government bonds to be somewhat more risky than normal, regardless of rating, as there is a 'bond bubble' building and when interest rates rise this bubble is likely to burst driving down capital values. There is a market move to short-duration bonds and towards corporates and sub-investment grade in response. Some buyers though are more restricted in their options and this is a factor that is seriously damaging annuiity rates, driven by QE which is helping keep the interest rates artificially low.
Problems stacking up for the future in order to help ease the current problems!
That is the end of your lesson in government bonds and credit ratings.
Howard - #1915 - no AAA does not represent a 'wonderful economy' at all. It merely reflects the agencies view of the government's ability to service its debt. The economy is a much wider matter..... A country can be AAA positive rated but still in the depths of a deep and long recession if it had managed its affairs well during the preceding growth phase of the economy.