[mlocher]

The downgrade cost every and bank in the world a couple of hundred million.Actually, since 7/1 through 10PM Sunday 8/7, the banks made hundreds of millions. Here is the data:

7/1 30yr: 4.4%; 10yr: 3.22%; 5yr: 1.8%; 6mo: 0.1%

8/5 30yr: 3.8%; 10yr: 2.58%; 5yr: 1.3%; 6mo: .01%

8/7 30yr: 3.9%; 10yr: 2.58%; 5yr: 1.3%; 6mo: .01% (10PM)

Bond rates have dropped significantly in 5 weeks and barely nudged higher since S&P's announcement. Banks have made money, not lost it. The stock market trauma is being caused by something bigger.

[L,TOWM]

I understand the inverse relationship between yield and price — after being in the securities for 21 years you do learn a few things, after all...

What I was speaking to was the reserve requirement that any regulated investor (such as a bank) would now need to increase on its Treasury portfolio. The haircut (or reduction to regulatory net capital) applied to regulated investors is a little bit more balance sheet stress than is needed in this environment.

I agree other things are going on — this seems to be a case of either the market already mostly pricing that in after the debt ceiling increase or (my own theory) everybody else looking so crappy that we still look less risky than most eryone else right now.