Christine Lagarde, the new chief of the International Monetary Fund, said confidence in U.S. Treasuries is “slightly eroded” as politicians continue to squabble over whether to raise the country’s debt limit.
“There was a positive bias toward the United States of America, toward Treasury bills,” Lagarde said in an interview on CNN’s “Fareed Zakaria GPS” to be broadcast tomorrow.
“The current crisis is probably chipping into that very positive bias,” she said, according to a transcript provided by CNN. The “very strong confidence” in Treasury bonds is “slightly eroded at the moment.”
Congress entered the final weekend before a threatened default deadlocked over legislation to raise the debt limit as President Barack Obama appealed to party leaders to reach a compromise. The Treasury Department has said the U.S. will breach its borrowing limit and run out of options for avoiding default if the $14.3 trillion ceiling isn’t raised by Aug. 2.
“This level of uncertainty, the trepidation arising from August the 2nd, is bringing about a lot of instability,” Lagarde said.