Can the yield on US Treasuries be considered the "risk free rate of return" if there are other securities which are lower-risk than US Treasuries?
Moody’s now admits two things: firstly that triple-A doesn’t mean risk-free (thanks, guys, I think we’d worked that out by now), and secondly — more interestingly — that the US is not the safest triple-A credit.
There are now three levels of triple-A, when it comes to sovereign bonds. The weakest — which have been classed as “vulnerable” to a downgrade — are Spain and Ireland. The strongest — which have been classed as “resistant” to a downgrade — are Germany, France, Switzerland, Austria, Australia, Canada, Denmark, Finland, Luxembourg, Netherlands, Norway, Sweden, Singapore, and New Zealand. And in the middle — stronger than the “vulnerable” countries but weaker than the “resistant” countries — are the two “resilient” countries: the UK and the US.
Which means that Moody’s now considers the USA to be a weaker credit than Finland or Singapore: a handy datapoint for anybody who thinks the US empire is crumbling.