Debt ceiling looms over stalled shutdown talks

Bloomberg 2/11/2019 Liz Capo McCormick

The standoff in Washington that’s increasing the chances of another U.S. government shutdown at the end of the week is also raising the specter of bigger risks as the reinstatement of the debt-ceiling approaches in early March.

Moody’s Investors Service analysts have warned that another shutdown could have a “more severe impact” on U.S. output. And if it were to extend beyond the March 1 end of the suspension of the current cap on America’s statutory debt capacity, “it would complicate negotiations over the debt ceiling.”

a close up of text on a black background: Government shutdown odds grow as debt-limit risk looms

“Everywhere I look, whether it’s this, a weak economy, or disappointing tax refunds, it’s a plus for bonds,’’ said Greg Valliere, who was previously chief global strategist at Horizon Investments. The inability of politicians to make a deal is “‘mind-numbing.”

Benchmark 10-year notes yield 2.65 percent, down from last month’s 2019 high of 2.8 percent.

Isaac Boltansky, a senior policy analyst at investment advisory firm Compass Point, said on Bloomberg TV Monday that the odds of a shutdown are now about 60 percent, up from 30 percent last week.

“This isn’t really solely a shutdown issue, it’s indicative of the legislative brinkmanship and the crisis governance that is really going to dictate the next year and half,” which includes debt-ceiling re-negotiations, he said.

Related video: Shutdown talks stall as Friday deadline approaches (provided by CNBC)