Before I get into this I would like to say I am exceptionally worried about the repercussions of the treasury failing to be able to make good on its payments at some point next week due entirely to political posturing. Though I would put a near zero chance on a UST missing a coupon, the willingness of payment on non-bond treasury obligations is already damaged goods and if there is not a plan in place to raise the ceiling this week, it will be an exceptionally ugly set of circumstances for everyone.
However, the chart I chose to bring attention to this evening is important because a seemingly endless string of yapping idiots continue to contend that an S&P downgrade to the long term debt of the US would be catastrophically problematic for interest rates. Zerohedge today went so far as to tweet “@zerohedge: For all those saying a US downgrade would have no impact on anything, please cite one historical precedent.”
Luckily for all of us the rates team at Nomura did just that and from the look of things every historical precedent seems to prove that an S&P AAA downgrade is the bell rung for govvie buyers to re-enter the market.