The president of the Federal Reserve Bank of Boston, Eric Rosengren, said Wednesday that the possibility of disruptions caused by the budget battle in Washington had been a factor in his decision not to scale back the Fed's stimulus.
The Fed surprised financial markets after its Sept. 17-18 meeting when it announced that it would keep up its $85 billion of bond purchases to stimulate the economy. That surprised investors who had expected the central bank to slow its buying.
Some analysts said the shutdown could push the reduction of stimulus to next year.
The market for U.S. government bonds, some of the world's safest investments, was mostly calm Wednesday.
The yield on the U.S. 10-year Treasury note, where global investors put their money when they want minimal risk, was little changed. It traded at 2.63 percent late Wednesday, compared with 2.65 percent the day before.
But there were signs of nervousness in the market for short-term U.S. debt.
Investors have been selling off one-month T-bills that mature around the time the U.S. government is expected to hit the debt ceiling.
In mid-September, the yield on a one month was between zero and 0.01 percent. On Tuesday, the yield had jumped up to 0.1 percent. The difference between 0.01 percent and 0.1 percent may seem trivial to the average American, but in the giant world of bond investing, it raises eyebrows.
Bond market watchers said the move is because portfolio managers of money market funds, those who most often buy T-bills with extremely short maturities, don't want to be caught holding U.S. government debt that matures around the time the federal government hits the debt ceiling, and therefore cannot pay its bills.
Markets Writer Ken Sweet in New York contributed to this report.
Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.