Consequences of a Downgrade

Interesting post from the WSJ MarketBeat blog on the fallout of a potential downgrade. This quote from BMO Capital Markets,

But a key question in many investors’ minds is what impact will a downgrade have on interest rates. Taking Japan as an example the answer is that a downgrade may have no impact on rates. Indeed, Japan was downgraded by S&P from AAA to AA+ on February22 2001 and the 10-yr rate moved 24bps lower the following week.

sounds counter-intuitive, but the huge rally in treasuries this week makes it appear reasonable…