U.S. of AA+: Markets A.M. With Spencer Jakab

U.S. of AA+: Markets A.M. With Spencer Jakab

It’s every investor’s fantasy: You hop into your DeLorean with a flux capacitor and peruse the next day’s newspaper. Imagine reading that one of the world’s leading rating agencies would downgrade trillions of dollars in bonds nearly everyone owns. You’d sell yours, naturally.

But in April 2011, when Standard & Poor’s issued a negative outlook on Uncle Sam’s credit, benchmark Treasury note prices began to rise, and not by a little. In August of the same year, when it actually downgraded the U.S. to a mere AA+, stocks plunged but Treasury debt continued to rally. Between April and early September the notes’ yield, which moves in the opposite direction of prices, fell from 3.4% to less than 2%.