Bond investors are beginning to look beyond the debt-ceiling quagmire even as Treasury Secretary Janet Yellen’s warnings about when the US will run out of borrowing capacity become more pointed. What lies beyond is a bit troubling.
While the Treasury department’s cash pile has slumped to levels last seen in 2017 and the amount of special measures it has available to keep it from breaching the statutory borrowing limit are shrinking, negotiators in Washington have been moving closer to an agreement to raise the nation’s borrowing capacity. As a result, market concern about the prospect of Treasury payments being skipped has eased somewhat. Short-dated bill yields have retreated from their extremes, as has pricing on credit default swaps. But there are new concerns on the horizon, some stemming from the very resolution of the debt crisis that’s shaping up as an increasingly likely possibility.