Unless the U.S. Congress settles a political showdown to raise the country’s

Unless the U.S. Congress settles a political showdown to raise the country’s debt ceiling in coming weeks, it will be left on the edge of an unprecedented default. But America’s main creditors in Asia may be the least of its worries.

The creditors – China, Japan and other Asian governments – have a hoard of U.S. Treasuries in their $5 trillion cache of foreign exchange reserves, the equivalent of almost a third of U.S. gross domestic product.

Despite having so much at stake as bond prices lurch violently, they are not about to do anything more than minor tweaking of their portfolios.

Sovereign reserve managers and advisers cite conventional reasons for the thinking.

Asian governments consider a U.S. debt default unthinkable and see the eventual tightening of U.S. monetary policy as a bigger issue for managing their reserves. Even if the United States was to default, its debt markets would still be the safest and most liquid in the world. Importantly, they take a far longer-term view than most private investors.

“We’re keeping an eye on potential market risks such as tapering, the debt ceiling and a government shutdown, but that does not necessarily mean we regard the current situation as critical,” a Japanese government official, who declined to be identified in the absence of authorization to speak openly to the media, told Reuters this week.

They also face a Hobson’s choice. These reserve managers would rather stay invested in Treasuries than be the cause of global market bedlam if they were to shift all that wealth.

More than 60 percent of the $5 trillion that Asian central banks hold is denominated in U.S. dollars and invested in American bonds and stocks, the International Monetary Fund estimates.

About $2 trillion of that amount was accumulated after November 2008, when the U.S. Federal Reserve embarked on its 5-year ultra-easy monetary policy, which included flooding global markets with cheap cash that drove U.S. yields to record lows.

Now, as an impending turn in Fed policy drives yields up and bond prices down, investors face a decline in the value of their bond portfolios.

A U.S. debt default would rock the bond market but most investors consider it implausible that U.S. lawmakers would allow that to happen. A similar political showdown in 2011 pushed the nation to within days of missing payments and led ratings firm Standard and Poor’s to strip Washington of its top-notch credit rating.

But veterans from both political parties in Washington are aghast that some lawmakers openly speak of managing a default that could be triggered next month if they don’t authorize more borrowing.

In exchange for agreeing to raise the $16.7 trillion debt ceiling, Republicans are seeking big spending cuts, which may strike at the heart of programs considered sacrosanct to President Barack Obama and his fellow Democrats.

Ironically, the uncertainty of Fed tapering and increasing the U.S. debt ceiling sent investors last week scurrying into the refuge of U.S. debt, rather than casting any doubt on how risk-free Treasuries really are.

Still, with the Federal Reserve set to relax its stimulus and eventually even tighten monetary policy, Asian reserves managers are preparing for a longer-term slide in the value of U.S. debt.

Making a profit from FX reserves had been easy during the last three decades as global interest rates gradually fell, said Choo Heung-sik, the head of Bank of Korea’s reserve management group.

“But the expected returns from bond investment will fall greatly in the future,” Choo said. “How to deal with this structural change in investment environment is what all the central banks are agonizing over.”

U.S. bond yields have already risen more than 100 basis points since May, when the Fed first indicated it is going to cut back on its $85 billion per month asset purchases.

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