Bond Traders Roiled by Fed See US Shutdown as Next Big Wild Card
To judge by recent history, a US government shutdown won’t be a huge event for the bond market. If anything, it could even provide a little short-term relief, since Treasuries usually rally when investors need somewhere to hide.
But it’s also adding a big dose of what financial markets hate the most: uncertainty.
Less than four months after resolving a standoff over the debt limit that threatened to push the US into default, the dysfunction in Washington is taking center stage on Wall Street again. And that’s complicating the lives of analysts and investors already trying to gauge the Federal Reserve’s interest-rate path as the US economy defies gloomy forecasts, inflation remains stubbornly elevated and growth sputters elsewhere around the world.
“Investors will definitely see this as a near-term market event risk that creates volatility,” said Jean Boivin, a former Bank of Canada official who now heads the BlackRock Investment Institute.