Salient to Investors:

S&P said the U.S. has a less than 1-in-3 likelihood of a downgrade of its AA+ credit rating in the “near term”, and sees tentative improvements including the deal to avoid the fiscal cliff.

Demand for Treasuries at auction has slackened amid signs of improvement with the U.S. economy. Investors have bid $2.98 for each dollar of debt sold at the U.S. government’s $905 billion in Treasury notes and bonds sold at auction this year compared with of $3.15 set in 2012, according to Treasury data compiled by Bloomberg.

The bid-to-cover ratio for Treasuries at 2.98 is still the 4th highest since at least 1994 – 3.04 ratio in 2011, 2.99 ratio in 2010, and 2.50 in 2009.

Tom Tucci at CIBC World Markets said it is not about whether the Fed will taper, but about when and by how much.

Andrew Wickham at Insight Investment Mgmt said inflation is not a big threat and it is very unlikely we will see any major rise in interest rates for Treasuries from here.

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