The Downgrade, a Year Later

When Standard & Poor's issued its famous downgrade of the creditworthiness of the United States government, a year ago, many pundits felt that it was more a case of grandstanding on S&P's part than a real concern that the U.S. was becoming more likely to default on its debts. If the performance of U.S. Treasury bonds are any indication, investors around the world have ignored S&P's downgrade and have continued to consider America's bonds one of the safest investments around.

The yield on the benchmark ten-year U.S. Treasury Note has more or less fallen steadily since S&P's announcement. From around 2.2 percent at the time of the downgrade, the yield has dropped to around 1.6 percent now. Remember, the yield falls as demand increases.

And it looks like that rate may stay low for some time to come. Wells Fargo yesterday issued a revised forecast for the remainder of the year, signaling that its year-end target for the ten-year Treasury is now 2.0 percent, down from its initial forecast of 2.5 percent. No matter what other economic problems our nation has, our debt continues to be one of the safest and most popular investments around.