Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Bonds don't freak out on S&P call

10year.top.pngClick the chart for current yields. By Annalyn Censky, staff reporter


NEW YORK (CNNMoney) -- Treasury yields rose slightly Monday, after Standard & Poor's turned pessimistic about the chances of a near-term resolution of the deficit problems in the United States.

Early Monday, the ratings agency lowered its outlook for America's long-term debt to "negative" from "stable," based on uncertainty surrounding the nation's fiscal problems.

While S&P maintained the nation's current credit rating at "AAA/A-1+," a top-tier investment grade, the revised outlook was enough to spook the market.

Immediately following the news, stocks sunk and prices for the 10-year and 30-year Treasuries fell. The yield on the 10-year note rose to 3.44%, while the 30-year's yield rose to 4.52%. Treasury prices and yields move in opposite directions.

U.S. Treasuries are backed by the government and often considered a less risky bet in times of uncertainty, but the country's long-term deficit has recently brought their safety more into question.

"There's a high risk that S&P will cut the U.S. credit rating, and it all depends on whether Congress can cut the budget fast enough and big enough," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. "It's a bit of a crapshoot at this point."

That said, bond traders are still confident the U.S. won't default on its debt. And some experts said that makes today's sell-off a good time to buy government bonds at a cheaper price.

"If the market is selling off because of this news, you should be buying!" Kevin Giddis, managing director of fixed income at Morgan Keegan, wrote in a note to investors.

"The U.S. will continue to do what it takes to make sure there is enough money, enough debt, and enough liquidity to ensure economic growth, while over time, reducing the deficit," he added.

Meanwhile, demand for shorter term bonds including the 2-year and 5-year notes continued to rise, boosted by renewed uncertainty about Europe's debt crisis. The 2-year yield fell to 0.67% and the 5-year yield fell to 2.1% in morning trading. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.83%3.86%
15 yr fixed2.95%2.94%
5/1 ARM3.13%3.05%
30 yr refi3.95%3.98%
15 yr refi3.05%3.05%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,643.01 -11.76 -0.07%
Nasdaq 4,828.33 15.62 0.32%
S&P 500 1,988.87 1.21 0.06%
Treasuries 2.19 0.02 0.83%
Data as of 7:32am ET
Company Price Change % Change
Freeport-McMoRan Inc... 10.50 0.31 3.04%
Bank of America Corp... 16.36 -0.08 -0.49%
Apple Inc 113.29 0.37 0.33%
Intel Corp 28.42 0.70 2.53%
Alcoa Inc 9.41 0.55 6.21%
Data as of Aug 28

Sections

No U.S. business went through bankruptcy more than Donald Trump's former casino empire during the last 30 years. Trump says there's nothing wrong with that. More

The U.S. economy has performed well this year. But there's lots of global gloom. Which will influence the Fed the most? More

The OnHub is fast and attractive, but its real power is an app that takes the pain out of managing a WiFi network More

How do you run a successful crowdfunding campaign? Indiegogo's CEO Slava Rubin offers his top tips and mistakes to avoid. More

Looking for something good on Netflix? These entertaining films will help you learn more about finance and investing. More