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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.08%4.25%
15 yr fixed3.17%3.23%
5/1 ARM3.30%3.37%
30 yr refi4.06%4.19%
15 yr refi3.16%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,122.01 15.31 0.09%
Nasdaq 4,569.62 -1.02 -0.02%
S&P 500 2,000.12 0.10 0.00%
Treasuries 2.36 -0.03 -1.25%
Data as of 1:15am ET
Company Price Change % Change
Bank of America Corp... 16.20 -0.13 -0.80%
Apple Inc 102.13 1.24 1.23%
Facebook Inc 74.63 -1.33 -1.75%
Yahoo! Inc 38.18 0.39 1.03%
Pfizer Inc 29.49 0.28 0.96%
Data as of Aug 27

Sections

Staggering interest from the Chinese in an immigration program has led the U.S. to run out of available visas for the first time ever. More

Former Fed chief Ben Bernanke believes the 2008 financial crisis was the worst in global history, topping even the Great Depression. More

Snapchat has gotten a $20 million funding round from Kleiner Perkins, valuing the company at $10 billion, according to the Wall Street Journal. More

Utah State professor Michael Glauser cycled 4,000 miles this summer, visiting 100 entrepreneurs across the country. Here's a snapshot of how they grew their businesses. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.