Potential S&P downgrades to other triple-A-rated countries such as Germany, France, Canada, Singapore, Switzerland and the U.K. are now on the table, he said.

“Other countries may still have a AAA rating by dint of their fiscal governance, but when the biggest house on the block sells for less than expected, every other homeowner in the neighborhood should reset their notions of value,” Colas said in a note Monday. [Treasury ETFs Rally in Risk-Off Trade]

“Media coverage of the downgrade has emphasized its potential to boost not only Treasury yields but also interest rates paid by consumers and businesses across the economy,” said David Kelly, chief market strategist at JP Morgan Funds.  “However, in theory, the downgrade effect should show up immediately since all market participants are now fully aware of it and the extremely low levels of interest rates while the market operated under the threat of a downgrade doesn’t suggest a surge in rates in reaction to it. In time, less market volatility and better economic growth should push interest rates much higher. But if this occurs, it won’t be because of the downgrade.”

iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT)


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