The long end of the Treasury bond curve was under pressure Monday after U.S. political leaders were unable to hammer out a deal on boosting the debt limit over the weekend.
The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) was down more than 1% in premarket action. Exchange traded funds that invest in U.S. government bonds have been volatile in recent weeks on concerns a failure to raise the debt ceiling would trigger a default. [Treasury Bond ETFs Gyrate on Debt Deal Speculation]
“It still appears very unlikely that the U.S. will actually default, since the political cost of being seen as the group which triggered one could be very high. However, it is less certain that the current negotiations will result in a big enough deal to satisfy the ratings agencies which currently have U.S. Treasury securities on credit watch,” said David Kelly, chief market strategist at JP Morgan Funds.
Standard & Poor’s last week repeated its warning that it could downgrade its U.S. debt rating if the limit isn’t raised by the Aug. 2 deadline.