G Fund and debt ceiling

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Q. If the government doesn’t raise the debt ceiling, what does that mean in practical terms for the TSP G Fund, and for government bonds and securities, in general? The G Fund is backed by the good faith and credit of the government, but if the government doesn’t have the ability to pay its debts, even for a short time, does that mean that the G Fund could have a zero return for that period?

A. Interest rates could rise and bond values could fall. Higher interest rates are generally bad for the F Fund and good for the G Fund. It’s possible that the government could fail to deliver on its promise to G Fund investors, but this does not appear likely at this point.

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