Germany's government debt may be downgraded in the next three months after Moody's decision to cut Japan's credit rating reflects investor concern about developed nation debt, Aberdeen Asset Management said.
“The writing is on the wall” for a German government downgrade, Singapore-based fund manager Anthony Michael said by telephone Wednesday, citing “weak fiscal fundamentals” in the country and risks from the eurozone structure.
German business confidence is at the lowest in more than a year as a global slowdown and Europe's debt crisis damped the outlook for economic growth. The Ifo Institute in Munich said its business climate index dropped to 108.7 in August, the lowest since June 2010.
“Japan's downgrade by Moody's is not surprising given the country's fiscal position.” Mr. Michael wrote in a note earlier Wednesday. The move is “likely to continue to add to investor concerns over the state of the developed world's sovereign finances.”
Moody's cut Japan's debt rating one step to Aa3, citing the yen's appreciation. Standard & Poor's downgraded the U.S.'s AAA long-term credit rating for the first time on Aug. 5.
S&P, Moody's and Fitch each have a “stable” outlook on the AAA-rated German sovereign bonds.
It is “not impossible” for French and Italian bonds to see a downgrade by year-end while it would be unlikely for there to be further downgrades in the Asia-Pacific region, said Mr. Michael, who oversees $7 billion.