Pacific Investment Management Co.’s Bill Gross said the U.S. will avoid a “catastrophic” default on Treasury securities if lawmakers fail to extend the debt limit on the nation’s debt.
“The U.S. Treasury is the center of the global financial complex,” Gross, manager of the world’s biggest bond fund, said during a Bloomberg Television interview with Trish Regan and Adam Johnson. A default would be “unimaginable,” as it would have “catastrophic” consequences on U.S. borrowing costs, and would trigger a “complex series of events worldwide” that would ripple through global financial markets.
The U.S. government began its first partial shutdown in 17 years after Congress failed to break a partisan deadlock by a midnight deadline. Congressional leaders have scheduled no further negotiations on spending legislation, raising concern among some lawmakers that the shutdown may have an impact on the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after Oct. 17.
The odds of a default are “a million-to-one” as the Treasury Department will be able to take other measures to ensure it is servicing the country’s debt, Gross said.
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