Rather than people viewing Treasury bonds as a safe haven to guard against possible U.S. government default on the debt, investors may view these bonds as potentially dangerous. The result could be a sell-off in bonds. Short-term Treasury bonds already have seen a rise in yield because of the perceived additional risk. “If we actually saw a default, whether it was a technical or otherwise default by the Treasury, that could be a very different reaction. You actually could see a more mixed response from Treasury, even a selloff,” said Matt Tucker, BlackRock’s head of iShares fixed-income strategy.
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