The Financial Associated Press (Shanghai, editor Huang Junzhi) reported that recently, global investors have focused their attention on the Evergrande debt crisis, but have ignored “another good show” between the two parties in the United States. Some analysts pointed out that the U.S. debt ceiling dispute seems to be more severe and is “the most dangerous game.”
Professional organizations including UBS (UBS) warned that, using history as a mirror, the market usually ignores the partisanship between Washington’s factions, at least until the very last moment. However, this uncertainty does cause market volatility.
In October 2013, the U.S. government once went into a shutdown due to the failure of Congress to approve the appropriations bill. Solita Marcelli, chief investment officer of UBS Global Wealth Management, pointed out this week that in the polarizing vote that year, shorter-term U.S. Treasury bonds became the target of a sell-off, helping to push up yields on government and commercial paper. , And pushed the S&P 500 index down 4%.
In fact, after the Federal Reserve announced its policy decision on Wednesday, Treasury bonds have been under selling pressure. Any hint that the United States may default may cause both the stock market and Treasury bond yields to be hit.
“Unlike the postponement of raising the debt ceiling, the federal government’s temporary shutdown usually does not cause too much market volatility. However, the way to solve these multiple problems is still unclear, and we cannot rule out the possibility of small market volatility in the next few weeks.” Marcelli added. road.
US Treasury Secretary Janet Yellen (Janet Yellen) warned this week that if the debt ceiling debate is not resolved, there will be “disaster.” On Tuesday, the Democratic-led House of Representatives passed a short-term government appropriations bill that will maintain appropriations until December 3. The bill also includes provisions to postpone the debt ceiling until December 16, 2022.
However, the bill is likely to be rejected in the Republican-controlled Senate. According to the latest report, in view of the Republican Party’s opposition to linking the debt ceiling to the expedient spending bill, the Speaker of the US House of Representatives, Pelosi, hinted that the Democrats will pass the expedient spending bill without raising the debt ceiling to avoid government shutdowns.
However, as many analysts have pointed out, the debt ceiling is not an economic crisis, but the embodiment of a political crisis. The government may shut down or, in the most extreme cases, stop paying some bills.
DBRS Morningstar (Morningstar) Sovereign Rating Co-head Thomas R. Torgerson wrote in an opinion earlier this month, “The United States retains some special credit advantages, and its high level of economic, institutional and financial flexibility supports it. Ratings. However, fringe policies regarding debt ceilings are a dangerous game.”
Against the background of extreme political polarization, the drama staged by the U.S. Congress, coupled with Uncle Sam’s addiction to spending money, makes investing in the United States with considerable political risks. Therefore, this also casts a shadow over the idea of whether US Treasury bonds can continue to enjoy the status of the safest safe-haven asset.
Brad McMillan, chief investment officer of Commonwealth Financial Network, a privately registered investment advisory trader, explained, “U.S. Treasury bonds are generally regarded as a risk-free asset. But if the government does not repay the debt, if it defaults, then the risk-free status will be questioned. .”