U.S. Treasuries are unlikely to default, although negotiations in the U.S. Congress to raise the debt ceiling are likely to go down to the wire, said Daniel J. Ivascyn, group CIO at Pacific Investment Management Co., in a keynote event at the Morningstar Investment Conference in Chicago on Wednesday.
Mr. Ivascyn, who is also lead portfolio manager for the fixed income behemoth's income, credit hedge fund and mortgage opportunities strategies, said, "Bottom line is we don't think it's in anyone's interest — even across the range of spectrums across the Democrats and Republicans — for there to be an outright default, which is why we think it's highly unlikely."
While an actual default is unlikely, Mr. Ivascyn said he believes a compromise will die in the Senate but have enough support to force the Biden Administration to take the negotiations seriously.
"Ultimately there will be some compromise and we'll avoid that highly unfortunate event," Mr. Ivascyn said.
While an actual default is unlikely to occur, he said this is a reminder to financial markets that there's "incredibly dysfunction in D.C."
"We think if these issues persist, it's coming to be yet another source of credit tightening and lack of confidence," Mr. Ivascyn said.