US remains investors safe haven despite S&P downgrade
S (AFP) - US Treasury bonds remain a hot ticket for investors looking for a low risk investment in a volatile market despite the unprecedented downgrade of Washington's credit rating, analysts say.
The decision by Standard & Poor's to strip Washington of its top triple-A rating has done little to diminish investors' appetite for US Treasuries, which along with gold, the Swiss franc and the yen are considered among the safest of assets.
At first it may seem somewhat paradoxical, but with investors concerned about a slowdown in the global economy, they are piling into US bonds which are also attractive because of the dollar's reserve currency status.
On Monday, the first trading day after the the S&P downgrade, US bond prices rose to record levels on strong demand in a fresh issue, with the rate of return for investors dropping from before the US lost its top rating.
On the secondary market the yield on 10-year securities dropped on Wednesday to 2.09 percent, the lowest rate since December 2008 and down from 2.56 percent on Friday, before the S&P announcement.
"We do not regard the Standard & Poor's downgrade as an immediate threat to Treasuries keeping their safe-harbour status," market analysts Briefing Research said.
"Treasuries are still the gold standard, so much so that as the US veered toward a default [during negotiations to raise its debt ceiling] Treasuries rallied on a flight-to-safety ... as if they were being rewarded for a crime", the group said.
The gyrations on global stock exchanges this past week have only increased their attraction.