By the Blouin News Business staff

Financial stress in Washington in one chart

by in U.S..


Credit: U.S. Treasury

The yield curve on U.S. government debt has inverted at the short end, a sign of the strain on funding markets and the stress on the financial system being imposed by the impasse in Washington over the partial shutdown of the U.S. government and the more critical issue of raising the federal government’s borrowing limit by an anticipated October 17 deadline.

The current yield on various maturities of debt is shown by the green line on the chart above. The yield on 1-month Treasury bills started to rise above longer maturity short-term debt at the start of the month — as investor fears of a possible U.S. default started to take hold.¬†For the same reason, in short-term repurchase (repo) markets, one of the workhorses of day-to-day bank-to-bank lending, overnight interest rates have risen to their highest level in five months.

The chart above also compares the current yield curve to that of a year ago (the purple line), illustrating the rise in long-term rates since then.