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Moody's: US growth in 2015 will help support sovereign debt markets, but risks remain

FXStreet (London) - In its 2015 Global Sovereign outlook, credit ratings agency Moody’s warns that while a firming of economic growth in the US in 2015 should bolster a gradually recovering global economy and help assure continued stable credit quality for the world's sovereigns, there remain risks that could interrupt growth and undermine sovereign creditworthiness across the globe.

"While the overall credit outlook for sovereigns around the world is stable for 2015, it is vulnerable to a set of shared risks, albeit to different degrees in different regions,” says Alastair Wilson, head of Moody's Global Sovereign Risk Group in the report published today. “The principal ones are the possibility of confidence shocks from the expected rise in US interest rates, especially in the case of a disorderly market reaction, the impact of lower growth in China and the euro area, the overhang of geopolitical risks, and reform fatigue”

Wilson adds: “ "On the positive side, global GDP growth is likely to continue at a steady pace in 2015, though at lower levels than before the crisis.”

“"Our sovereign ratings already incorporate some increased cost of capital and volatility that an orderly normalization process in interest rates would be expected to have. However, downside risks could arise from a process that is disorderly or is perceived as such, as illustrated by events in 2013 and early 2014, when anticipated Fed actions prompted sharp reversals in capital flows and higher-than-expected rises in yields on debt."

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