Sunday, October 1, 2023
HomeEconomyDebt bill looks to further raise cost of insuring U.S. defaulted contracts

Debt bill looks to further raise cost of insuring U.S. defaulted contracts


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LONDON (Reuters) – The cost of insuring against U.S. debt default fell further on Tuesday, reflecting investors’ support for a boost to the dollar agreed by U.S. lawmakers. Preliminary agreement on the exchange rate is optimistic .4 Trillion Debt Ceiling. 98

Trading picked up on Tuesday after much of Europe and the U.S. were closed for holidays on Monday. 98

In morning trade, U.S. one-year credit default swaps (CDS) – a market-based measure of default risk – narrowed to

Basis Points (bps) from 10 basis points at Monday’s close, S&P Global Data (NYSE: 56 SPGI

) Show Market Tuesday intelligence. 98

US five-year CDS fell to bps from 10 data show that the basis point at the close of Monday. 98

The crucial first test will come on Tuesday when the House Rules Committee considers the debt ceiling bill, a necessary first step before the full House votes. 98

Both Democratic President Joe Biden and House Republican leader Kevin McCarthy believe they will have enough votes to pass it into law by June 5, when the Treasury Department says there will not be enough vote money to fulfill its obligations. 98

But some investors remain concerned about the debt-limit deal because some provisions of the proposed bill could undermine growth. 98

On the other hand, the expected issuance spree by the US Treasury to build up its cash buffer could significantly reduce market liquidity, which could push up short-term interest rates. 98

“We suspect these concerns may be overblown,” wrote Karl Schamotta, chief market strategist at Corpay in Toronto. 98

“While there are some procedural mines ahead that may affect the final wording, there is no comparison with the so-called ‘ The impact of ‘fiscal responsibility’-related spending from a macroeconomic perspective should be barely noticeable, leaving the government’s biggest spending largely unchanged,” Schamotta said. 98

With regard to the massive supply the U.S. government expects after passage of the debt ceiling bill, Schamotta noted that Treasury officials “have a good track record of slowing down issuance or otherwise minimizing the disruption caused by a surge in funding.” Practice.” 133



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