With the clock running out on the Aug. 2 deadline to increase the debt ceiling, short-dated Treasury bill yields have gone up "fairly considerably over the course of the last week," Tad Rivelle, CIO for fixed income at TCW, told CNBC Friday.
Rivelle manages $65 billion in U.S. fixed-income assets.
"We also have the possibility of the repo market being upset. That's the short-term lending market that so many primary dealers, banks and other financial institutions rely upon for funding their portfolios of securities and assets," Rivelle said.
Also making it more difficult for investment discussions in the near term is the overall mood of uncertainty that is being "somewhat unnecessarily created in the mind of the marketplace," he added.
But Rivelle noted that "it's not really clear to us that anything fundamentally necessarily is being changed by the types of discussions we are hearing out of Washington."
The takeaway for investors, he explained, is that "there are a lot of competing plans out there, obviously, for how to handle the unsustainability of federal fiscal finances. All of them contemplate very significant reductions to spending, some of them contemplate increases to revenue or perhaps taxes."
Lastly, to the extent that any of these get implemented, "we are going to see a withdrawal of federal fiscal stimulus...less government spending that will have a cooling effect on economic growth throughout the remainder of 2011 and 2012," concluded Rivelle.
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