Part 4/5:
This particular situation, distinguished from a debt ceiling crisis, likely means that the impact on the market will be manageable, albeit with concerns over liquidity during the year-end. However, assessing the longer-term outlook, the neutral rate established by the Federal Reserve plays a crucial role in guiding Treasury yields. With an increased neutral rate now penciled in at 1%, some Fed members suggest that it could reach as high as 2.6%. This expectation signifies a substantial revision and implies that the Fed Funds rate could remain well above 4%. Consequently, the ten-year Treasury yield continues to hover stubbornly around the 4.50% mark, indicating a stable yet challenging environment for Treasury investors.