Australia is likely to retain its AAA credit rating even if the world slides into recession, bolstering the attraction of the country’s bonds among foreign investors, says UBS AG strategist Matthew Johnson.

Australia, Norway and Switzerland are likely to retain their AAA status “even if there is a recession next year,” says Johnson. Australian bonds will “have no trouble finding buyers” in 2012 with “investors competing with each other for the bonds they own,” he says.

There are US$227 billion worth of Australian AAA paper out of US$5.2 trillion worth of AAA rated paper globally, says UBS.

But there is only US$507 billion worth of bonds globally that have a so-called quad AAA status, bonds rated AAA by Fitch, Moody’s S&P and Chinese rating agency Dagong, says the Zurich-based investment bank.

China’s State Administration of Foreign Exchange, the world’s biggest fixed income investor with about US$3 trillion in assets under management, takes its cue from Dagong, says Johnson. It and other foreigners hold about three–quarters of Australia’s AAA bonds, up from less than 70 percent earlier this year, he says.

“For the next two months Australian bonds will outperform global bonds,” says Johnson. That will continue to bolster the value of the Australian dollar, he says.

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