By Dhara Ranasinghe
LONDON (Reuters) – U.S. debt ceiling wrangles and the euro’s growing dominance of bond issuance linked to environmental or sustainability goals could start to chip away at Treasuries’ status as the ultimate reserve asset, putting Europe in a position to boost its share.
The $22 trillion market in U.S. government bonds is the bedrock of the global financial system with unrivalled depth and liquidity. Viewed as a super-safe asset that will never be defaulted on, it underpins the dollar as the world’s number one reserve currency.
Except that a default, be it only a short-lived technical one, no longer looks like an impossibility and that could hurt the safe-haven image of Treasuries, analysts and investors say.
As the Treasury bumps up time and again against borrowing limits, the growing polarisation of Congress has in recent years turned what should be a simple vote to raise the debt cap into a series of prolonged crises.
While an October default has recently been…