Downgrade Doesn’t Matter as Bonds Show Fed Faith After S&P
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The $9.4 trillion U.S. government bond market is proving Federal Reserve Chairman Ben S. Bernanke matters more than Standard & Poor’s.
Even though the U.S. is poised to run a budget deficit of $1.6 trillion and S&P removed the nation’s AAA rating, investors are lending the government money at record low rates. Five days after the first downgrade to AA+, the Treasury sold $24 billion of 10-year notes to yield 2.14 percent. When the U.S. was running budget surpluses from 1998 through 2001, Treasuries of similar maturity yielded an average of 5.48 percent.