Warren Buffett Is Buying Treasuries Regardless of US Downgrade by Fitch

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., speaks at the Goldman Sachs 10,000 Small Businesses Summit in Washington, D.C., U.S., on Tuesday, Feb. 13, 2018. Goldman's 10,000 Small Businesses is an investment that brings economic opportunity and assists entrepreneurs to create jobs by providing better access to education, capital and business support services. Photographer: Andrew Harrer/Bloomberg

(Bloomberg) -- It's business-as-usual for Warren Buffett's Berkshire Hathaway after Fitch Ratings' downgrade of the US.

“Berkshire bought $10 billion in US Treasuries last Monday. We bought $10 billion in Treasuries this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills, Buffett said on CNBC. “There are some things people shouldn't worry about,” he said. “This is one.”

Fitch cut the US's sovereign rating to AA+ from AAA earlier this week, citing the nation's growing deficit and increasing political brinkmanship around the periodic efforts needed to raise the debt ceiling. The timing was apt — less than 24 hours later, the government boosted its quarterly borrowing plans for the first time in two-and-a-half years.

While markets reacted moderately in the aftermath of the downgrade, long-maturity Treasuries are poised for their worst week this year. The catalysts include bigger-than-expected increases in auction sizes beginning this month, the Bank of Japan loosening its grip on domestic yields and strong US jobs data, all of which hit demand for US debt.

Meanwhile, the short-maturity Treasuries Buffett said he's looking to on Monday have seen strong demand as Federal Reserve interest-rate increases have pushed yields to the highest levels in more than a decade. This Monday's auction of six-month bills produced one of the highest investor demand metrics since March 2021.

Buffet's consistent take-up of Treasury debt stands in marked contrast to another high-profile investor. Late Wednesday, Pershing Square Capital Management Founder Bill Ackman said he is short 30-year Treasuries “in size,” as both a hedge against the impact of higher long-term rates on the stock market and also as a standalone bet.

WATCH: Richard Francis, the co-head of Americas sovereign ratings at Fitch Ratings, talks about the decision to downgrade the US credit rating by one level, to AA+ from AAA.Source: Bloomberg

“There are many times in history where the bond market reprices the long end of the curve in a matter of weeks, and this seems like one of those times,” Ackman wrote on X, the platform previously known as Twitter.

--With assistance from Carter Johnson and Alexandra Harris.

(Adds Ackman's wager against long-term debt and bill auction context.)

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