The normally expected effect of Standard & Poor's downgrade of America's debt, which took place on August 5th, would have been that our nation should have had to pay out more interest in order to get investors to buy its bonds. After all, if our credit wasn't as sound as previously thought and we were more at risk of default, it should be more difficult, and more expensive, to get people to lend us money over the long term.
Instead, the opposite has happened. The month of August saw Treasury bonds reach their strongest gains in almost three years, since December 2008. Yields plunged to record lows as investors, rather than finding American debt risky, chased after it as a safe haven. Treasury bonds returned more, on average, than corporate bonds did in the month of August.
Does that mean that S&P's call was wrong? Not necessarily, but it does appear that the number of investors who think that America's debt has gotten more risky is a distinct minority.
No comments:
Post a Comment