AVON, North Carolina–The sun came up over the Outer Banks this morning, after the US House of Representatives passed compromise debt-ceiling legislation on Monday. A vote in the Senate and a signature from the president are the last two scenes before we can move to the next act in the willful abdication by America of the role of benevolent hegemon.

The political drama surrounding the raising of the US federal debt ceiling obscured the significant fact that critical threats to the country’s credit rating remain. And these threats, unresolvable through the flawed process that dominated the Washington, DC, summer, are causing safety-seeking investors to look for new AAA-rated sovereign alternatives. Canada and Australia are two markets that figure prominently in this calculus.

The US is home to the largest, most liquid range of investable AAA-rated assets in the world, with USD11.1 trillion outstanding. The combined size of all other outstanding AAA-rated sovereign debt is USD7.2 trillion. Germany accounts for USD1.72 trillion and France USD1.7 trillion, but both countries are saddled by euro concerns and economic activity at the periphery of the European Union. France, too, is the subject of credit-rating-cut rumors, should its federal government again fail to cut its budget significantly. The UK has enacted an austerity program that has impressed investors fixated on government spending, but its economy is so weak that these good intentions may yet result in a cut to its credit rating anyway.

With total government debt outstanding of USD1 trillion, solid fundamentals and significant resource wealth, Canada is an increasingly attractive alternative. Triple-A rated Australia, with a bond market of USD0.3 trillion, relatively healthy government finances and ample commodity wealth offers similar stabilizing characteristics.

The money-flow trend is highlighted by events of recent weeks and months, but it’s been underway for years. Monthly inflow to the Canadian bond market has averaged CAD8 billion since early 2009, up from CAD1.5 billion before the financial/credit/economic crisis that we now know as the Great Recession. Non-residents now hold 25 percent of outstanding Government of Canada bonds, up from 15 percent before the crisis. Investors are also buying provincial and corporate bonds, too.

The Canadian bond market has heated up in recent weeks, along with rising political tensions south of the border. And the US dollar has fallen to new lows against the Canadian dollar, at the same time decoupling from the commodity prices, particularly crude oil, to which it’s tightly linked. This suggests that, far more than a mere petrocurrency to be ridden during upturns in economic activity and market sentiment, the Canadian dollar is increasingly viewed as a safe haven by global investors.

The Bank of Canada continues to warn of the dangers a strong loonie presents to Canadian exporters and the broader economy. On the other hand, greater inflows will keep yields lower than they might otherwise be based on domestic economic fundamentals; lower financing costs would offset the drag of a stronger currency on manufacturers, potentially stimulating demand for business investment and household spending.

Meanwhile, on the other end of Earth, another former satellite of the British Empire is enjoying similar status in investors’ eyes. The Australian dollar–backed, as is the Canadian dollar, by copious stores of natural resources–has also risen to new highs against the US dollar. A relatively small bond market of USD0.3 trillion means large new flows will have an outsized impact–Australian government bond yields are at their lowest levels relative to US-backed paper in 16 months.

Unconstrained by concerns about its standing relative to the US dollar, the Reserve Bank of Australia was the first developed-nation central bank to hike interest rates in the aftermath of the Great Recession. In fact Australia, alone in the developed world, didn’t even sink into recession during the 2007-09 period, its economy buoyed by strong demand from China and other emerging Asian markets. And the aussie will continue to be supported as China deploys as much as USD1 trillion around the world over the next decade to secure access to coal and other resources critical to its economic development.

CurrencyShares Canadian Dollar Trust (NYSE: FXC) and CurrencyShares Australian Dollar Trust (NYSE: FXA) are exchange-traded funds (ETF) that provide exposure to the loonie and the aussie, respectively. Their movements will track closely the movements in the underlying currencies. These ETFs are redundant, however, if you have long positions in any Canadian or Australian equities.

The key to building wealth over the long term is buying and holding solid assets. Although the US will remain the issuer of record for standard-setting risk-free rate of return securities, it’s prudent to have exposure to assets that will benefit from its relative weakness. You can do so in a way that helps you generate income as well as capital gains, through dividend-paying Canadian and Australian equities.

The aftermath of the debt-ceiling debate is frankly unlikely to match the frenzy that preceded its ultimate resolution. Institutions have taken steps, such as seeking permission to stick with less-than-AAA-rated US debt against investment charters, to prevent a massive selloff that would destabilize financial markets. The credit market will adjust, likely making it more expensive for everyone to borrow.

What’s happening Washington isn’t instilling any confidence around the world, however, crucially in China, the biggest foreign holder of US government debt. At the very least, as was suggested by the official China Securities Journal, in late July, the debt-ceiling fiasco signals long-term dollar weakness that will push up commodity prices and pose inflation risks for the world in the short term.

At the same time, however, it’s possible that this further impingement of public-sector spending in the biggest economy in the world, already growing at an anemic pace, will have a deflationary impact.

The Roundup

HSBC Bank Canada, affiliate of global banking giant HSBC Holdings Plc (London: HSBA, NYSE: HBC) and the largest foreign-owned bank in the Great White North, reported a 7.3 percent rise in profit attributable to common shareholders for its second quarter, as provisions for bad loans and credit losses declined 56.9 percent to CAD31 million. The loan-loss provision decline is a good portent for Canada’s Big Six banks, which will report fiscal third-quarter earnings beginning Aug. 23 with Bank of Montreal’s (TSX: BMO, NYSE: BMO) announcement. On the other hand, HSBC Canada reported a decline in interest income as well, indicating slackening loan demand, and trading revenue also fell.

National Bank of Canada (TSX: NA, OTC: NTIOF) follows Bank of Montreal on Aug. 25, while Royal Bank of Canada (TSX: RY, NYSE: RY) reports Aug. 26, Bank of Nova Scotia (TSX: BNS, NYSE: BNS) Aug. 30 and Canadian Imperial Bank of Commerce (TSX: CM, NYSE: CM) Aug. 31. Toronto-Dominion Bank (TSX: TD, NYSE: TD) wraps up fiscal third-quarter reporting for Canada’s Big Six on Sept. 1. Like HSBC the Big Six will likely show that Canadians are better able to meet existing loan obligations. Also like HSBC the group is likely to show reduced trading revenue and demand for lending, as well-capitalized businesses sit tight after locking in low interest rates over the trailing 12 months.

Here are estimated and confirmed second-quarter reporting dates for the CE Portfolio, including links to summaries for those Holdings that have already released numbers. We’ll update the list as official dates are announced.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–July 29 Flash Alert
• Artis REIT (TSX: AX-U, OTC: ARESF)–Aug. 10 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Aug. 12 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Aug. 5 (estimate)
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPUF)–Aug. 5 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Aug. 9 (confirmed)
• Capstone Infrastructure Corp (TSX: CSE, OTC: MCQPF)–Aug. 12 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Aug. 11 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–July 29 Flash Alert
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Aug. 9 (confirmed)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Aug. 9 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Aug. 12 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Aug. 10 (confirmed)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Aug. 11 (tentative)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Aug. 3 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Aug. 9 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Aug. 3 (confirmed)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Aug. 10 (confirmed)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Aug. 5 (confirmed)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Aug. 1 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–July 29 Flash Alert 
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Aug. 12 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Aug. 4 (estimate)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Aug. 4 (confirmed)
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–Aug. 3 (estimate)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Aug. 8 (confirmed)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Aug. 5 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Aug. 4 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Aug. 3 (confirmed)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Aug. 10 (confirmed)
• Perpetual Energy Inc (TSX: PMT, OTC: PMGYF)–Aug. 10 (estimate)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Aug. 11 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Aug. 5 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Aug. 9 (estimate)
• Yellow Media Inc (TSX: YLO, OTC: YLWPF)–Aug. 4 (confirmed)