The Bond Market Is Already Worrying About a Debt-Ceiling Debacle
“US default threat is higher than in past years,” says Bank of America.
US House Speaker Kevin McCarthy, a Republican from California, walks from his office to the House floor at the US Capitol in Washington, DC, US, on Monday, Jan. 9, 2023.
Photographer: Nathan Howard/Bloomberg“REPUBLICANS CAN GET ALMOST EVERYTHING BACK ... BY SIMPLY PLAYING TOUGH IN THE UPCOMING DEBT CEILING NEGOTIATIONS,” declared former President Donald Trump in a social-media post on Monday.
“Oh no,” sighed bond traders, wearily, in response.
After one of the worst years on record for bond market returns following a sharp rise in interest rates and inflation, investors are kicking off 2023 with fresh concerns over the possibility of another debt ceiling debacle following a drawn-out fight to elect the new House Speaker Kevin McCarthy. Hardline Republicans who blocked McCarthy’s speakership now appear to be tying his future to a reduction in government spending that risks pushing the US government into yet another deficit stalemate.