Egan-Jones downgrade of US reminds investors of a longer-term risk for bonds. Egan-Jones is a small rating firm compared to the big three -- Moody's, S&P and Fitch. The question is whether these big players will downgrade US in coming year. S&P already cut US to AA plus last year -- which ironically pushed investors into Treasury bonds and the dollar on safe-haven demand. Moody's has warned this week that it may strip US off the highest credit rating if lawmakers don't reach an agreement to fix the country's fiscal woes. If Moody's cuts US, Treasury bonds might get hit this time if the downgrade reduces investors' confidence to hold dollar-denominated assets. The potential pain will be on US consumers with higher interest rates. The 10-year note is recently 1 point lower in price to yield 1.868%. USD/JPY up more than 1.15% at 78.36.
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