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(Bloomberg) -- The potential for a U.S. govt shutdown reemerged as a key risk across markets after President Trump suggested Tuesday night that he’d veto a Congressional spending bill needed to keep the government open, unless it included funding for his proposed border wall. Such a move would buoy Treasuries, while negatively impacting the dollar, analysts said. Fitch Ratings warned that the U.S.’s credit rating may be in jeopardy. KEY VIEWS

• BMO Capital Markets (strategists Ian Lyngen and Aaron Kohli, in note)
  • Lead-up to govt shutdown toward end of September could drive 10-year yield below 2 percent
  • “What is more important isn’t whether or not there is a government shutdown, per se, but rather how aggressively the threat of one is used in the rhetoric in the run-up to the deadline”
  • A BMO survey earlier this month found 77% of clients expected a govt shutdown to spur a Treasuries rally, with an estimated 13bps decline in 10-year yields
• NatWest Markets (John Briggs, head of strategy in the Americas, in phone interview)
  • Shutdown would likely be bond positive, risk-asset negative, and dollar negative
  • 10Y yield could move below 2% should debt ceiling become an issue; fears of a debt ceiling breach would drive market more than govt shutdown concerns
  • “You’re going to have dislocations in the bill market around the drop-dead date because money funds won’t be able to hold those securities, and anything with a coupon due in those days will be tricky”
• Brown Brothers Harriman & Co. (Marc Chandler, head of currency strategy, in note)
  • Trump’s remarks were “unsettling”
  • “Government shutdowns are not unprecedented in the U.S., of course, and they typically are mildly disruptive. They are not good for the investment climate”
  • Connecting govt shutdown to debt-limit fight would heighten the stakes; “missing a debt payment is considerably more serious and one that -- in this game of brinkmanship largely within the Republican Party -- neither side seems to want to risk”
• Hoisington Investment Management (chief economist Lacy Hunt, in Bloomberg Television interview)
  • “Government shutdowns, if they last, they’re very short affairs. It would be really very difficult for it to go on very long”
  • “Treasury market is extremely volatile over the near term”; ultimately, long-term yields are headed lower, regardless of shutdown
  • “Rates cannot stay up. The economy is just too fundamentally weak”

--With assistance from Brian Chappatta, Lananh Nguyen and Elizabeth Stanton. To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Vivien Lou Chen

(Bloomberg) -- Prices in Rio de Janeiro city extended deflation in mid-August despite the acceleration seen in the rest of the country. News, however, are far from being positive as the fall of Rio’s CPI is accentuated by the fiscal crisis that ravages the Olympics state.

• Civil servants’ unpaid wages and abandoned infrastructure assets in search of buyers lead the CPI to fall 0.16% in the August IPCA-15 index, against a decrease of 0.13% in mid-July, according to data from National statistics agency IBGE
  • Rio is the Brazilian metropolitan region that presented the most accentuated deflation of prices
• "Very low inflation, or even deflation, in recent months is almost becoming a synonym of a non-growth path," said Coinvalores fixed-income strategist Paulo Nepomuceno
  • Finance Minister Meirelles "is insisting thet we’re growing, but no, we’re not," said Nepomuceno
  • Lack of control of the debt in Rio led to civil servants not receiving their salaries, which accentuated this deflation, he said
• From April to June, the unemployment rate in Rio increased to 15.6%, compared to 14.5% in the first quarter
• NOTE: Brazil CPI +0.35% M/m Through Mid-August; Est. +0.40%
• NOTE from Aug. 18: Dining with Madonna no more, Rio grapples with rising crime

Original Story: Deflação no Rio destoa e expõe desencanto após Olimpiadas To contact the translator on this story: Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net To contact the translation editor responsible for this story: Priscilla Murphy at pmurphy134@bloomberg.net Reporters on the original story: Patricia Lara in Sao Paulo at plara6@bloomberg.net; Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net Editors responsible for the original story: Daniela Milanese at dmilanese@bloomberg.net Leonardo Lara

(Bloomberg) -- Highest contribution to Aug. IPCA inflation index will come from transportation and housing groups, due to fuel and electricity price pressures, as it happened in mid-Aug. data. Food group will continue to pressure CPI down for the fourth consecutive month, Itau says in a report signed by economist Elson Teles.

• In the transportation group, the largest contribution to the Aug. IPCA-15 came from fuels, reflecting the increase in gasoline, ethanol and diesel taxes
• In the housing group, the main contribution came from electricity
• On the other side, the largest low contribution came from food and beverages group

Original Story: Itaú revisa projeção para IPCA ago de 0,50% para 0,37% To contact the translator on this story: Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net To contact the translation editor responsible for this story: Danielle Chaves at djelmayer@bloomberg.net Reporter on the original story: Ana Carolina Siedschlag in São Paulo at asiedschlag@bloomberg.net Editors responsible for the original story: Daniela Milanese at dmilanese@bloomberg.net Taís Fuoco

--Washington Newsroom (202) 624-1820