SAFER AS IN ONLY?

U.S. a safer haven amid global financial turmoil (Tom Petruno and Nathaniel Popper, 3/15/11, Los Angeles Times)

Global upheaval "makes the U.S. a better safe haven," said Gail Dudack, head of Dudack Research Group in New York.

Investors often gravitate to the biggest and most liquid securities in times of trouble, which typically means markets in the U.S., Japan and Europe.

But Japan can't play that role now, given the massive uncertainty about its economy in the near term.

And concerns about Europe's government debt crisis still pervade those markets, despite the European Union's decision last week to beef up a bailout fund for the most financially distressed countries.

Late Tuesday, Moody's Investors Service downgraded Portugal's debt rating to A3 from A1 and said the outlook was negative. Although the country may be able to reduce its crushing debt costs by using the EU's bailout fund, "Questions would remain as to when the government would be able to re-access the capital markets and on what terms," Moody's said.

Although the U.S. government's soaring debt burden remains a source of deep concern to many investors, Uncle Sam still has no trouble borrowing. And as stock markets have crumbled in recent weeks, safety-seeking investors have flocked back to Treasury securities, pushing their yields down.

The annualized yield on five-year T-notes plunged to a six-week low of 1.98% on Monday from 2.05% on Friday. The yield fell further early Tuesday before ending at 1.96%.

Falling interest rates mean bonds are rising in value.

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