"The full faith and credit of the United States would be impaired and our country would likely face a financial crisis and economic recession as a result," Ms. Yellen stated during her testimony, adding that "the debt ceiling has been raised or suspended 78 times since 1960."
But "Keep Calm and Carry On" was the phrase that PIMCO's managing director and head of public policy Libby Cantrill used to title her latest "Washington Watch" column.
In her Sept. 22 column, Ms. Cantrill wrote that since Senate Minority Leader Mitch McConnell, R-Ky., has indicated zero Republican support for raising the debt ceiling, Democrats will likely "be forced to reopen and amend the budget reconciliation instructions and pass the debt ceiling increase alone but getting there will take some time and could start being reflected in the markets (although it has barely registered as of now)."
"Legislating is not easy, and what we are seeing now, while certainly in more public view than what a lot in Democratic leadership would prefer to see, is all pretty predictable," Ms. Cantrill wrote.
In a commentary from the BlackRock Investment Institute published Sept. 20 titled, "Debt ceiling showdown redux," authors Jean Boivin, head of the institute; Wei Li, global chief investment strategist; Kurt Reiman, senior strategist for North America; and Nicholas Fawcett, member of BII's economic and markets research team, wrote that they "remain pro risk and opt to look through any short-lived volatility that could result from a battle over lifting the U.S. debt limit and funding the government."
"We don't see fundamental risks from the debt ceiling showdown with a low risk of technical default and limited chance of a temporary government shutdown," BlackRock's commentary stated, before adding: "We believe Congress will ultimately reach an agreement to raise or extend the debt limit, but likely not until right before the Treasury exhausts its borrowing capacity."
Anthony Brown, a partner and U.S. director of capital markets for Mercer LLC's U.S. wealth business, said in an email that Mercer is "not advising institutional investors take any action."
"There's almost no chance that the government will default, and a short-term government shutdown would not have a lasting impact," Mr. Brown added.
Meanwhile, Carlton W. Lenoir Sr., executive director of the Chicago Public School Teachers' Pension and Retirement Fund, wrote in an email that while the $13.1 billion pension plan always remains "cognizant and vigilant when it comes to current events impacting the markets," the retirement fund, like all institutional investors, is a long-term investor.
"As an institutional investor, it's important to remember that we are not market traders or timers — we are long-term investors with an infinite horizon," Mr. Lenoir said. "We set an asset allocation policy that allows us to ride out market volatility and we remain confident in our manager selection, mix between public and private assets, and long-term focus."