Park In Treasuries If US Defaults

01 mins 51 secs

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Robert Tipp, Chief Investment Strategist at PGIM Fixed Income, thinks investors should scoop up treasuries if politicians are unable to agree on a solution to the debt ceiling in time, commenting, how the issue gets resolved is extremely important, with some outcomes having implications of epic proportions. Tipp pointed out Treasuries do well in times of crisis and would likely see a spike in demand if the US default on its debt.

I think you're buying treasuries, right? It would be a risk off event and there may be variations in how the curve uh deals with it. It could be bad for the back end of the curve, the long end could underperform. Uh But in a flight quality treasuries usually do well. Uh we saw that in the S V B crisis and we've seen it in past debt crises uh in the US before. Uh and I think that would be the case this time as well. I think it's worth keeping in mind though that 12 to 24 months down the road unless we happen to be right at another debt ceiling debate, you know, I don't think this is gonna matter. Uh I think it is uh extremely important in the short term, how it gets resolved and it may be uh of epic proportions uh if you got certain kinds of outcomes, some that are, are, are widely uh envisioned and some may be less so. but 12 to 24 months from now, I think the basics, the risk here alluding to your curve which is expecting rate cuts is that we may have evolved into a different kind of secular environment where the growth is not so much so debt driven. Uh And that as a result, you know, growth continues here. Uh And we end up seeing the fed holding or, or doing more hikesuh and, and getting some upward adjustment in the valley of the yield curve.


Robert Tipp, Chief Investment Strategist at PGIM Fixed Income, advises investors to buy treasuries if politicians cannot resolve the debt ceiling issue in time because treasuries tend to perform well during crises and would likely experience increased demand if the US defaults on its debt.