Standard & Poor's placed the United States' debt on negative credit watch and announced today that there is a 50% chance it will downgrade the credit rating of the United States to AA. The ongoing political battles regarding the debt ceiling and the uncertainty of resolution weigh heavily on the rating agaencies.
On July 13, 2011 Moody's Investors Service put its Aaa rating on the U.S. government's bond rating on watch for possible downgrade, citing the "rising possibility that the statutory debt limit will not be raised on a timely basis," which would lead to a default on U.S. Treasury debt obligations.
As we've seen saw with life insurers in 2008, a downgrade IS NOT the end of the world (an AA rating is still very good), but it could mean a rise in treasury yields because it will cost our government more to borrow money, which in turn will impact the returns on Treasury Bond funded structured settlements. New structured settlements funded with Treasury Bonds may see improved yields.