A downgrade may not mean anything to the bond market itself. Here is something I posted in a discussion with a friend:
Speaking as someone involved in the financial markets, the rating itself is tempered by perception and demand. Therefore, a AAminus Treasury bond may very well trade exactly the same as it did as a AAA. that means the borrowing costs of the Treasury do not change. Neither will car loans, etc... I will let you decide if that means the govt will see that as a reason not to change its ways.Now, back to the ratings agencies.
- They messed up the housing crisis and are overly concerned with being too late here
- They messed up before and have seriously changed their ways to become reliable
- They messed up before and we now know they are irrelevant.
Perception is reality so this downgrade means something. But it says more about how we as a society pass responsibility to others and wonder why things go bad. Do your own homework.