The Three Most Telling Charts About the U.S. Debt Downgrade
It’s Friday… so that means it’s time to take a break from our regular articles and serve up a healthy dose of charts.
This week, I selected only those related to the first sovereign debt downgrade in the history of the United States – since that’s the only investment news that matters these days.
As you’ll see, another downgrade is probably looming. But this time for a European country. Hurry up and read on to find out which one…
Treasuries Bite Their Thumbs At Standard & Poor’s
On Tuesday, I predicted that the debt downgrade by Standard & Poor’s wouldn’t impact the safety of Treasuries one bit. And sure enough, that’s proven true.
You see, if the bonds were suddenly less safe, investors would be fleeing in droves, driving prices lower and yields higher. But the opposite is happening.
Here’s a look at prices for 10-year Treasury futures since the week began. They’re clearly headed in one direction.
Jeff Gundlach of DoubleLine Capital believes that Treasuries could keep rallying, too. I agree. So take that S&P!
Viva La France… Or Not!
If misery loves company, we might be celebrating with the French (and Greeks and Irish and Portuguese) soon. Credits default swaps – the price to insure France’s government debt – are skyrocketing.
Right now they’re in line with Italy’s CDS prices in July. With a full-blown debt downgrade appearing imminent in the weeks ahead for Italy, one might not be far behind for France if this trend continues.
The Path Back to Pristine Credit
All the hoopla surrounding debt downgrades would make you believe it’s a death sentence. That’s hardly the case. Since 1980, five nations lost their AAA credit ratings from S&P and managed to earn them back.
Granted, it took some time. But if our misrepresentatives in Washington heed the wake-up call, at least there’s hope that we can get our pristine credit rating back someday.
That’s all for this week. But before you sign off, do me a favor: I’d love to know what you think about our work at Wall Street Daily. So get involved by sending us an email to firstname.lastname@example.org or by posting a comment below.
Thanks and enjoy the weekend!
Ahead of the tape,