Wednesday saw TD Securities note they........>

CANADA: Wednesday saw TD Securities note they don't exp. "a sig. mkt impact from

the Fitch downgrade, as the universe of comparable AAA-rated +ve yielding assets

is too small to trigger sig. outflows. Still, it does raise several questions:

incl. will other rating agencies follow suit? We will be watching the period

following the Jul 8 budget update to potentially hear from S&P & Moody's."

- Specifically on investment flows, TD noted that "Canada's downgrade clearly

isn't good news: Notably, downgrades by other agencies may be reflected in

ratings for affiliated issuers. But in the near-term at least, we don't think it

will have sig. impacts on GoC rates. The club of countries with AAA ratings from

S&P, Moody's, and Fitch is small: Australia, Denmark, Germany, Netherlands,

Sweden, Norway, Singapore, and Switzerland. Of those countries, only Australia,

Norway, and Singapore offer +ve nominal 10-year sovereign yields. We could see

some investment flows diverted from Canada to those 3 countries on the margin,

but those mkts probably aren't large enough to absorb sig. outflows: AUD assets

accounted for 1.7% of global reserve assets in Q419, versus 1.9% in CAD, while

SGD and NOK were bundled into the "other currencies" basket."