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The sharp rise in the 2/10 yield curve to 281 basis points has analysts eyeing a ratings...

The sharp rise in the 2/10 yield curve to 281 basis points has analysts eyeing a ratings downgrade to U.S. debt. An improving economy often causes flattening as punters get ahead of Fed rate increases. The difference this time is a Fed chief that, if anything, is leaning towards easier policy. STPP +0.2%. FLAT +0.6%.
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  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    American exceptionalism leads these "experts" to believe this has never happened before. In fact, it has happened to many countries.

     

    First the long rates go higher. At some point the issuer (the US Treasury) decides to concentrate in shorter maturities and wait for lower longer rates. As the lower rates never come, the debt becomes concentrated shorter maturities at higher rates. Brazil, a classic example, had at one point all of their domestic debt in less than 2 year maturities at very high REAL rates.

     

    What is the impact of the agency ratings on this? In my opinion, none. They are always behind the curve.
    21 Jan 2011, 03:38 PM Reply Like
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