I would have expected that a worse credit rating would result in higher interests rates, what happened last time?

Worse credit rating is bad economic news. When there's bad economic news, the market tends to 'flee towards safety', and that means selling risky investments and buying treasuries. When the market is moving capital to treasuries, borrowing costs are reduced.

(Doesn't always happen like this, and may not have happened like this last time, but it's not uncommon)

> flee towards safety

The search term is "flight to quality", and Matt Levine was writing how it was a bit broken recently due to GOP messing around.

Incorrect.

> Fitch Downgrade August 1 2023

> SPY around 455 fell to 433 from August 1 to August 18

> By October 27th SPY bottomed around 410 (-10%)

> From August 1 to October 23, US 10y yield went from 3.9% to 5%

Stocks went down and bond yields went up last time. The Federal Reserve raised the federal funds rate from 5-5.25% to 5.25-5.50% during the same time period.

Oh, I missed 2023. Was thinking of 2011 or whenever.

The 2011 one was reported more widely since it was the first agency to downgrade Treasuries, and in that case borrowing costs did go down.

You seriously think a reduced credit rating is good news? Or is it another flip attempt to ignore consequences, like a teenager who survived DUI - 'I got there even faster, so it worked pretty well'.

People's insane desire to borrow at ridiculous rates is what got us here...

> Last time around this led to reduced borrowing costs

Last time Treasuries were unambiguously a haven asset. That correlation was broken on Trump’s liberation day.

Altogether, I’d be surprised if this downgrade has a material impact on financial markets. It’s much more interesting for the House.