McCarthy Under Pressure As Clock Ticks To Avert Shutdown: Treasury Yields Mirror Market Jitters

As the clock ticks toward an Oct. 1 deadline to avoid a shutdown, the U.S. government is grappling with political brinkmanship that threatens to disrupt federal funding. Senate negotiators from both sides of the aisle are inching closer to a short-term spending agreement aimed at averting a government shutdown.

According to Bloomberg, Republican House Speaker Kevin McCarthy faces a significant challenge as he navigates opposition from conservative factions while contemplating whether to bring a pending Senate spending deal to a vote in the House.

Senate Republicans and Democrats are hashing out the details of a short-term spending measure designed to keep the government operational beyond Oct. 1.

Moderate House Republicans, seeking a bipartisan solution, are ready to employ a rarely used procedure to force a vote on a temporary funding plan. However, this tactic, though potentially effective, is time-consuming, as the deadline is now less than a week away.

Moody’s Concerns

Amid the political turmoil, Moody’s Ratings, the last major credit rating agency to assign the U.S. a top rating, has expressed reservations about the country’s institutional and governance strength, Bloomberg reports. In a note shared Monday, the rating agency said that “a shutdown would be credit negative for the U.S. sovereign.”

According to Moody’s, a government shutdown would have the most significant impact on organizations dependent on federal funding for their income or debt servicing obligations. This would also extend to entities heavily interconnected with the economy of the Washington, D.C. area.

Read also: Moody’s Warning Adds Fuel To US Treasuries’ Carnage Amid Shutdown Concerns

Treasuries’ Carnage Rages On

The upward momentum in Treasury yields persisted into Tuesday, with the 10-year bond hitting a 4.56% yield, marking its highest point since mid-October 2007.

Meanwhile, concerns also loomed over the 30-year bond, as yields climbed to 4.70%, reminiscent of levels last seen in February 2011.

The market value of long-term Treasury notes continued to shrink, as tracked by the iShares 20+ Year Treasury Bond ETF TLT, which dipped another 0.5% on Tuesday, further extending its year-to-date losses to 13%.

This unsettling trend suggests that the U.S. Treasury market may be heading for its third consecutive year of declines, as the TLT ETF experienced a 6% drop in 2021 and a substantial 33% decline in 2022.

Chart: Long-Term Treasury Bonds Slump 13% Year-to-Date, Heading for Third Consecutive Annual Decline

Read now: Jamie Dimon Warns Of Economic Turmoil If Fed Raises Interest Rates To 7%: ‘That Will Be The Tide Going Out’

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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