By Davide Barbuscia
CHICAGO, April 26 (Reuters) - BlackRock has been
buying U.S. Treasuries in anticipation of an economic slowdown
and a protracted fight between the U.S. government and Congress
around the debt limit, BlackRock Chief Investment Officer of
Global Fixed Income Rick Rieder said on Wednesday.
A U.S. debt default, though considered unlikely, would send
financial markets into a tailspin as investors would lose
confidence in the U.S. ability to pay its bonds, which serve as
building blocks for the world's financial system.
Paradoxically, however, in previous debt ceiling crises
investors have sought protection from the economic risks of a
default by piling into U.S. long-term Treasuries.
"If you go through a debt ceiling crisis, it's a global
crisis ... And the flight to quality ends up being in U.S.
Treasuries," Rieder told Reuters in an interview. "If we default
it will be a short-term default and so it makes sense to have
some more interest rate exposure."
He said he had been adding 10-year Treasuries in recent
weeks, with worries around the debt ceiling being a driver, as
well as concerns around an economic slowdown and recent stress
in the financial system.
"The debt ceiling is certainly part of it," he said, adding
other recent steps were an overall reduction of risk in the
portfolio, including in credit.
Weaker-than-expected U.S. tax receipts have recently
indicated that the deadline to raise the $31.4 trillion
borrowing limit could be sooner than expected, sending
shockwaves in the short-term part of the U.S. government bond
market.
The U.S. House of Representatives will vote on a Republican
bill to raise the U.S. government's $31.4 trillion debt ceiling
and slash spending on Wednesday.
The White House has called on Congress to raise the debt
limit without conditions, as it did three times under Biden's
Republican predecessor, Donald Trump.
"It's so hard to foresee how far down the road this debt
ceiling is going to take us," Rieder said.
(Reporting by Davide Barbuscia; Editing by Stephen Coates)
Messaging: davide.barbuscia.reuters.com@reuters.net))
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.