S&P downgrades the US

Stocks are down 1.7% . Full faith is not valid anymore , so some of the OAS stuff is not valid in actual practice?

US Treasuries are not risk-free anymore ?

I think it’s great how once S&P says there is a problem, we decide there is a problem. Not the rapidly expanding debt burden, or the printing of money, or the move out of the dollar and into gold, noooooo it’s when the same rating agency who missed the MBS crisis says we’re in trouble does everybody think there is a problem. How about shorting the treasury and going long TIPS?

Yield of TIPS will increase too (as Treasuries), right ?

If people start worrying about inflation they will sell out of treasuries and buy into tips, treasury spread will go up, tips down.

u mean tips spread go dowm

Is TIPS exposed to both market value risk and cash flow risk? ---------------------------------------------------------------------------------- Treasury Inflation-Protected Securities (TIPS) Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation. ---------------------------------------------------------------------------------

It looks like Gold and silver are stabilizing , and the 10 year treasuries are back where they were before the debt outlook bear is having an effect on only stocks, dollar is actually up. Doesn’t look very serious , just a warning shot across the bows

pimpineasy Wrote: ------------------------------------------------------- > u mean tips spread go dowm i think i said that

said what?

S&P didn’t downgrade the US Debt. That would be kinda of a big deal.

(Reuters) … “This new warning highlights the need for the U.S. to take better control of its fiscal destiny if it is to avoid higher borrowing costs and maintain its central role at the core of the global economy,” said Mohamed El-Erian, chief executive at PIMCO, which oversees $1.2 trillion in assets. … The picture had become bleak enough to prompt PIMCO, the world’s largest bond fund, to announce in February it had sold all U.S. Treasuries in its $236 billion Total Return Fund. Bill Gross, PIMCO’s chief investment officer, said he expected interest rates to climb, the dollar to fall and the United States to lose eventually its AAA credit rating. ------------------------------------ The actions taken by a giant firm like PIMCO might influence the market.

To clarify, is not just the outlook downgraded to negative? The actual rating remains at AAA. Granted, the outlook downgrade is obviously a strong precurser to the actual rating downgrade, but it is not definitive.

no it’s not a downgrade, but even a negative watch is a big deal for the U.S. govt and people probably feel it is a harbinger of further negative action

Kabaka you are correct, looks like a warning to mend your ways

It’d be a big trouble if the market didn’t respond negatively as today…

Please remember that S&P downgraded Japan back in 2002 and then…nothing happened!

Make no mistake…US’s country/political risk is the lowest in the world.

It’s a bit weird for S&P to bring up the possibility of a US debt downgrade while maintaining that some US corporations are AAA rated. But I suppose it’s more complicated than that.

I don’t see the correlation between a corporation and a country, they have completely separate balance sheets…