The Treasury Department said S&P’s decision was flawed by a $2 trillion error. The ratings firm said there was no mistake and the discussion hinged on which baseline assumption should be used from the nonpartisan Congressional Budget Office.
U.S. general-government debt may rise to about 84 percent of GDP by 2015, S&P said July 10 in a report. That’s higher than the company’s 79 percent projection on Aug. 5, 2011.
S&P’s move roiled the markets, contributing to a global stock-market rout that erased about $6 trillion in value between July 26 and Aug. 12, 2011. Treasury 10-year yields fell as low as 1.67 percent that September from 2.41 percent on the day of the downgrade as investors sought a haven.
Markets have since recovered, as the economy gains strength following the worst financial crisis since the Great Depression and deficits start to shrink.
Dollar Soars
The dollar has gained 11 percent, according to the Bloomberg U.S. Dollar Index, which tracks it against the euro, yen, pound and seven other major currencies, since the cut. It has appreciated 4.3 percent in 2013, on pace for the biggest gain in five years.
The S&P 500 has surged 43 percent over the past two years, reaching an all-time high of 1,709.67 on Aug. 2, after the Labor Department said the economy added 162,000 jobs in July and the unemployment rate dropped to 7.4 percent. That’s the lowest since December 2008.
Yields on 10-year Treasuries, the benchmark for everything from corporate bonds to mortgages, rose three basis points last week to 2.6 percent as the price of the benchmark 1.75 percent note due May 2023 fell 1/4, or $2.50 per $1,000 face value, to 92 23/32, according to Bloomberg Bond Trader prices.
Yields, while rising, compare with the average of about 6.7 percent since 1980, when the bull market in bonds began.
Ten-year notes yielded 2.61 percent today as of 9:33 a.m. in London.