“At some stage in the next two weeks, we will either have a default, a downgrade or a deal. For investors, while the last outcome would clearly be the best, it is difficult to see how Treasuries fare well in any scenario,” Kelly said.
“While a default would cause investors to run to a ‘safe-haven’ asset, it is hard to see how that could be the security in default. Nor are there many examples in financial history of a security rallying on the news of its own downgrade,” the JP Morgan Funds strategist wrote in a weekly outlook Monday. “However, if there is a deal, even if it limits the growth in Treasury issuance over the next few years, it could remove the roadblock of budget uncertainty from both the economy and markets, an eventuality that should prove stock-positive and bond negative.”
iShares Barclays 20+ Year Treasury Bond
