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S&P Downgrades Italy to A Rating
09/20/2011
Treasuries gave up some of yesterday’s impressive gains as equity markets strengthened overnight. The latest development out of Europe revolves around S&P’s downgrade of Italy from A+ to A. The move seems to have had very little impact on markets as investors are more focused on tomorrow’s conclusion of the FOMC meeting. Optimism is increasing that the Fed will provide a new twist to help stimulate the stalled US economy. Meanwhile, political divides are widening after President Obama took a less conciliatory stance and announced plans to target the rich with tax increases to help reduce the deficit. Today’s economic calendar is light with a mixed bag of results on US housing. August housing starts dipped slightly more than expected, 571k actual vs .590 est, but permits unexpectedly increased to 620k versus estimates of a decrease to 590k. Currently, the 10yr yield is at 1.978% (1.972% Monday) and the 2-10 yield spread is at 181 bps, unchanged since yesterday morning.
