So, if your credit score suffered a downgrade, how would that affect the interest rate you pay on a mortgage? It would increase that rate, correct? That's why it's a little strange to see that even though the US Treasury's credit rating was downgraded from AAA to AA+ this week, the yields are NOT going up. Why not? I have to assume that this situation scared the markets so much that people want the relative safety of US Treasuries at all costs. As they bid up the price of the treasury securities (T-notes, T-bonds) they push down their yields. It's called a flight to quality, and we've seen it a few times in the recent past. When the stock and/or bond markets look scary, investors panic and run to the relative safety of US Treasury securities. This causes interest rates to go down. Even though a credit downgrade should really have made them go up. Oh well. Wild times.
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