By Seth Carpenter, Morgan Stanley chief global economist
When Worlds Collide
In 2011 and in 2013, the US government approached the statutory debt limit, with Congress raising the limit only at the last minute. The closer we got to the so-called “X-date,” the more markets reflected the tension. The Treasury ran down the amount of Treasury bills outstanding to stay under the limit and, as a result, bills were scarce and went up in price and down in yield…except for those maturing around the X-date, which cheapened as markets avoided them.