Standard & Poor's cut its outlook on US sovereign debt from "stable" to "negative." Although this was the first time the agency cut its outlook in the 70-year history of the firm, the credit rating remained at AAA.
A negative outlook means that there is 1 in 3 odds that there will be a downgrade within the next two years. Markets were off around 200 bps for most of the morning, until rallying late in the day. The yield on 10-Year US Treasuries touched 3.45% in early morning, but the bond markets took the news lightly, as yields settled down on the day - possibly signalling that the S&P news was not as big of a deal as investors first suspected. Nonetheless, investors surely need to be aware of the rising debt crisis throughout the world, and this is a good place to start.
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