Standard & Poor’s downgrade of US government debt from AAA to AA+ had many analysts expecting a rise in yields on treasuries. Yields rise when prices drop. By essentially saying that the credit was not as good as previously thought, the risk is higher and therefore an increase in compensation in the form of yield would be demanded by investors who would pay less (causing price to fall and yields to rise) for treasuries.
That didn’t happen on Monday. Yields dropped as investors looking for a safe haven for money pulled out of equity markets put them in US treasuries. Demand pushed prices up, and yields down. So perhaps AA+ is the new AAA after all?
Created by Preet | Nov 01, 2021
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