This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Investors Like T-Bills Despite Downgrade

NEW YORK ( TheStreet) -- Despite Standard & Poor's downgrade of U.S. debt from triple-A to double-A status, faith in T-bills is still strong.

Uncertainty in the health of the global economy has rattled investors, heightening the attractiveness of Treasuries as a safe haven asset. The benchmark 10-year note was last rising 25/32, diluting the yields to as low as 2.48% in early Monday trading.

The market had been anticipating the move by Standard & Poor's before the ratings agency made its downgrade announcement late Friday. Many analysts are noting that the decision does not make a fundamental different to how investors view Treasuries.

"The downgrade was not really new information," says Priya Misra, fixed income strategist at Bank of America. Ultimately, demand for Treasuries remains strong as we are in a risk-off environment, she explained.

"The downgrade was really just one more straw in a slew of information and events that indicate a weakened economy," said Alan de Rose, Treasury trader at Oppenheimer. "The market has broken into lower yields and will try to find a trading range there. In the absence of economic strength, yields will probably stay there."

Investor Warren Buffett has said that he would continue to buy Treasuries even at zero-percent interest rates. "I don't like it, but we'll do it," said Buffett on CNBC Monday morning.

Misra at Bank of America says she expects demand for 10- and 30-year notes to ease as the debate in Washington on how to deal with the U.S. deficit in the long term plays out.

"In the longer term, people have options to diversify away from the dollar, which will steepen the yield curve," she added.

Rating agencies Moody's and Fitch Ratings are expected to decide whether or not they also will downgrade U.S. debt. Their choice depends heavily on how a newly created bipartisan committee in Washington will address the nation's long term fiscal problems. Misra says that while further downgrades are likely, they will not be met with as much of a shock reaction as seen in markets this time around.

-- Written by Chao Deng in New York.

>To contact the writer of this article, click here: Chao Deng.

Readers Also Like:


Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%
YHOO $44.52 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs