econintersect.com
  • 토토사이트
    • 카지노사이트
    • 도박사이트
    • 룰렛 사이트
    • 라이브카지노
    • 바카라사이트
    • 안전카지노
  • 경제
  • 파이낸스
  • 정치
  • 투자
No Result
View All Result
  • 토토사이트
    • 카지노사이트
    • 도박사이트
    • 룰렛 사이트
    • 라이브카지노
    • 바카라사이트
    • 안전카지노
  • 경제
  • 파이낸스
  • 정치
  • 투자
No Result
View All Result
econintersect.com
No Result
View All Result
Home Economics

Looming U.S. Default Risk Pushes Investors To Trim Some Debt Exposure

admin by admin
2월 21, 2023
in Economics
0
Looming U.S. Default Risk Pushes Investors To Trim Some Debt Exposure
0
SHARES
0
VIEWS

Bond investors are beginning to cut holdings of U.S. debt to prepare for a possible government default that they see as very unlikely but potentially seismic for financial markets around the globe.

The U.S. Treasury reached its $31.4 trillion borrowing limit in January. Unless congress lifts or abolishes that cap, the government could start to default on bonds that prop up the global financial system and are deemed some of the safest investments.

U.S. Treasury Secretary Janet Yellen

Some bond managers have begun to adjust short-term exposure to Treasuries to skirt losses during the period when the government may deplete its ability to pay its bills. Making preparations for a potential default is difficult, partly because of uncertainty over how much revenue the Treasury will amass from Americans filing income taxes in April.

Goldman Sachs Group Inc’s (GS.N) asset management arm is trimming its exposure to Treasuries that could be hit by the political standoff.

“You have to be thinking about what instruments you own, what maturities,” said Ashish Shah, chief investment officer for public investing at Goldman Sachs Asset Management (GSAM), which manages more than $2 trillion. “Just because you own an instrument like a T-bill doesn’t mean that you sit there and let it mature — you may want to trade out of it.”

Investors need to actively manage their positions during a prolonged tumultuous period in which borrowing negotiations could upset markets, Shah said. The Federal Reserve’s path of interest-rate hikes makes the situation stickier, said Shah.

In January, U.S. Treasury Secretary Janet Yellen said the government could only settle its bills through early June without raising the limit, but some analysts have forecasted that it will be the third or fourth quarter before the government depletes its cash and borrowing capacity. The Congressional Budget Office cautioned it could happen between July and September.

The Treasury bills yield curve shows investors are asking for higher returns to hold debt due in August, flagging that it is deemed riskier than other maturities.

Wider spreads between Treasury bill yields and matched-maturity overnight index swap (OIS) rates – a gauge for future policy rates – in mid-August indicate views that bills maturing then bear a higher risk of a default payment, said Jonathan Cohn, head of rates trading strategy at Credit Suisse (CSGN.S) in New York.

“A kink (in the Treasury bill curve) has become evident through mid-August where the latest 6-month bill issues mature,” he said.

Bid yields of Treasury bills
Bid yields of Treasury bills

Standoffs over the debt limit in the previous decade have mainly been resolved without causing deep financial turmoil. But Republican lawmakers with a small majority in the U.S. House of Representatives could refuse a compromise with Democratic President Joe Biden, which in turn could rile markets.

Bond investors are navigating uncertainty around what they’re referring to as the X-date, when the government can no longer satisfy its payments. An actual default is regarded as an event with a low possibility but potentially high impact. It could send shockwaves through global markets and lift borrowing costs for both the U.S. government and corporations.

Buy Crypto Now

“The probability of a default is very low, but I’m okay telling my clients to avoid T bills with a six-month maturity … That is probably the most concrete way in which we’re approaching this,” said Ed Al-Hussainy, senior interest rate strategist at Columbia Threadneedle.

Al-Hussainy may also purchase Japanese yen, because a U.S. default would possibly challenge the safe-haven status of the U.S. dollar and prompt investors to look for protection in other currencies, he said.

Tags: bond investmentbond investorsbond marketbusinessCredit Suissefinancial marketsinvestmentinvestorsJanet YellenJapanese yenthe USTreasury billUS dollar
Previous Post

CoinShares Is Still Afloat Despite Heavy FTX Losses – Q4 Report

Next Post

Ethereum Might Break The $1,700 Resistance Level Soon – Derivatives Data

Related Posts

Bitcoin Is Finally Trading Perfectly Like 'Digital Gold'
Economics

Bitcoin Is Finally Trading Perfectly Like ‘Digital Gold’

by admin
6,746 ETH Valued At $12M Was Just Burned
Economics

6,746 ETH Valued At $12M Was Just Burned

by admin
Bitcoin Is Steady Above $29,000 Awaiting US NFP Figures
Economics

Bitcoin: What Next After Consolidation Ends?

by admin
US Government Offloads Another 8,200 Bitcoin – On-chain Data
Economics

US Government Offloads Another 8,200 Bitcoin – On-chain Data

by admin
Bitcoin Stumbles As Macro And Regulatory Concerns Arise, What Next?
Economics

Bitcoin Stumbles As Macro And Regulatory Concerns Arise, What Next?

by admin
Next Post
Ethereum Might Break The $1,700 Resistance Level Soon – Derivatives Data

Ethereum Might Break The $1,700 Resistance Level Soon – Derivatives Data

답글 남기기 응답 취소

이메일 주소는 공개되지 않습니다. 필수 필드는 *로 표시됩니다

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin market blockchain BTC BTC price business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

© Copyright 2024 EconIntersect

No Result
View All Result
  • 토토사이트
    • 카지노사이트
    • 도박사이트
    • 룰렛 사이트
    • 라이브카지노
    • 바카라사이트
    • 안전카지노
  • 경제
  • 파이낸스
  • 정치
  • 투자

© Copyright 2024 EconIntersect