As Sotheby’s prepares for a major New York sale tonight, estimated to earn $81.5–111.8 million, it got hit with a sharp bond downgrade from Standard & Poor’s, pushing the auction house deep into junk bond territory.

S&P slashed the auction house to junk status, cutting its corporate rating to BB-minus from the lowest investment-grade rung of BBB-minus, and indicated that further reductions might be in the offing.

“The global demand for art has lessened significantly due to economic uncertainty worldwide,” S&P said, specifically citing falling commodity prices on reduced demand from China and the Middle East. “We believe that revenues will drop substantially in the worldwide art auction market.”

Standard & Poor’s blamed the auction house’s practice of providing guarantees to sellers, which has cost the company money over the past year. It expects Sotheby’s to continue to suffer for the practice “as the art auction market remains depressed over the next 12 months.”

The dour view for art contrasts with signs that the U.S. economy has reached bottom. Ben Bernanke, the Federal Reserve Board chairman, told Congress today that the central bank expects economic growth to resume later this year. America’s financial problems, especially in the housing market, kicked off a global slump that has devastated art prices.

Sotheby’s next challenge is likely to be with its bondholders. In cutting the auction house’s rating, S&P said it is likely to breach financial-performance agreements with lenders. Although this would theoretically allow bondholders to push the company into bankruptcy, a more likely result would be for a second renegotiation of debt covenants, following an agreement earlier this year. Sotheby’s would likely have to pay increased interest or agree to other terms that would reduce its financial flexibility.

The auction house has been cutting costs, but S&P said it didn’t think future reductions would help much.

On the plus side, Sotheby’s is likely to have enough cash from earnings and credit lines to be able to run its business in the coming months.

The stock market took the ratings action in stride. Shares in Sotheby’s, the only major auction house that is publicly traded, were down just 6 cents, or 0.5 percent, at $11.94, in afternoon trading. The stock has been on a mild upswing since touching a March low of $6.05 after the company announced weak fourth-quarter earnings. A year ago, however, it traded near $28.

The sharp bond downgrade comes hours before Sotheby’s Evening Sale of Impressionist and modern art that includes a Picasso painting and a sculpture by Alberto Giacometti, each expected to bring in $16–24 million. The overall sale is seen reaching $81.5-111.8 million.