Who's Afraid of Standard & Poor's?

| Tue Apr. 19, 2011 10:47 AM PDT

It's not like Paul Krugman needs my help in spreading his opinions, but people really ought to be paying a little more attention to the fact that right after S&P's warning yesterday morning about U.S. debt, interest rates on U.S. debt.....fell. Why? Because demand for U.S. securities rose and their price went up, as the chart below of a typical treasury index fund shows.

In other words, actual bond traders not only ignored S&P, they decided that U.S. debt was even safer than they thought before. And if S&P's warning didn't have any impact on trading in actual treasuries, it almost certainly didn't have any impact on anything else, including the stock market. As Krugman says, "People, this was a non-event."

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