Standard And Poor's Dares To Change Outlook On U.S. Treasury Debt To Negative

It was a bit of a shocker to see Standard and Poor's change its outlook on U.S. government debt to negative. The agency is still rating Treasury debt at AAA, but it cites unclearness about resolving the huge deficits relative to other governments' debt currently rated triple-A.

“More than two years after the beginning of the recent crisis, U.S. policy makers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures,” said Standard & Poor’s credit analyst Nikola G. Swann.

If a meaningful agreement to address medium- and long-term budgetary challenges isn’t reached and implementation isn’t begun by 2013, it would render the U.S. fiscal profile meaningfully weaker than its AAA-rated peers, analysts said.

“This is killing stocks and bonds,” said David Ader, head of government bond strategy at CRT.

Indeed, it has - but the gold market loved it. Shaking off the hex that condemned the metal to some downward volatility after a good start to the pit session, gold shot up to a new record on the outlook news. Stuck at $1,482 when the news was released at 9 AM ET, the metal leapt to $1,496 within fifteen minutes. After a slump back to $1,488, it surged higher to reach its new record of $1,498.90. The next pullback brought it down to $1,490 but that reversed too.

Interestingly, the greenback recovered from the swacking it took from the outlook news.