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Ratings Cut Amounts to Few Basis Points

The appetite for U.S. assets grows despite the threat of a downgrade.

By Daniel Kruger, Allison Bennett, Bloomberg | Updated on August 02, 2011

As the prospect for the loss of the U.S.’s AAA credit rating approaches and congressional leaders agree on a pact to avert default, bonds and currencies are signaling increasing demand for the assets of the world’s largest economy.

Treasury yields average 0.72 percentage point less than the rest of the world’s sovereign debt markets, Bank of America Merrill Lynch indexes show. The difference has expanded from 0.15 percentage point in January. The dollar saw greater than average net inflows last week compared with the previous year, according to Bank of New York Mellon, the custodian for more than $20 trillion.

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