If the U.S. doesn't figure out how to cut its long-term deficits, it could lose its top-notch credit rating, Standard & Poor's said today.
This was big news, and lots of stories this afternoon suggested that the announcement caused stock prices to fall.
I don't have any idea why the stock market fell today. But if you want to see the effect of the S&P announcement, the bond market — not the stock market — seems like the first place to look. After all, the bond market is where the U.S. government goes to borrow money.
And bond investors didn't seem to care.
If they were worried, you'd expect them to be selling Treasury bonds. That would drive up interest rates, making it more expensive for the government to borrow money.
But that didn't happen. The interest rate on 10-year and 30-year Treasury bonds actually fell a little bit today.
In other words, after S&P issued its warning about government debt, investors were more eager, not less, to lend the government money.