"If the bond market thought that bonds weren’t going to get paid, they would be selling them. And they’re not!" CNBC's Michelle Caruso-Cabrera said on Morning Joe.
The bond market isn’t afraid of the shutdown, CNBC’s Michelle Caruso-Cabera reported on Friday’s Morning Joe. But should it be?
“Just yesterday the U.S. Treasury put out a report that was very alarmist,” she said, referring to the Thursday report warning of the effects of defaulting on the U.S. debt.
“It could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth,” the report said of a potential default.
But Caruso-Cabera said it’s unlikely a default will happen.
“The chances of a default are very slim to none and we see that in the bond market,” she said. “If the bond market thought that bonds weren’t going to get paid, they would be selling them. And they’re not!”
“That doesn’t mean that it could not still have a dramatic impact on the economy,” MSNBC’s Brian Shactman said, adding that there is no way of knowing the full effects.
But Caruso-Cabera said that when the government runs out of money, the Treasury prioritizes its spending—making it even more unlikely the U.S. will default on its debt.
“They literally have to balance the budget overnight…What has historically always been the case all over the world is you pay interest on the debt because gosh you don’t want investors to think you’re not going to pay because you need them to keep giving you money, you pay the military because you fear a coup, and you pay social security to the elderly. Those are the three priorities. The Treasury has so far refused to say that that would be the priorities, they’ve said oh we don’t have the ability to do that. The bond market doesn’t believe them.”