Economic news

Cost of insuring against US default contracts further on debt bill hopes

2023.05.30 17:48


© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration

LONDON (Reuters) – The cost of insuring exposure to a U.S. debt default fell further on Tuesday, reflecting investor optimism over a tentative deal by U.S. lawmakers to raise the $31.4 trillion debt ceiling.

Trading picked up on Tuesday after much of Europe and the United States were closed on Monday for holidays.

In mid-morning trading, the U.S. one-year credit default swap (CDS)- a market-based gauge of the risk of default – narrowed to 53 basis points (bps) from 133 bps at Monday’s close, data from S&P Global (NYSE:) Market Intelligence showed on Tuesday.

U.S. five-year CDS fell to 41 bps from 56 bps at Monday’s close, the data showed.

A crucial first test comes on Tuesday, when the House Rules Committee takes up the debt ceiling bill, in a necessary first step before a vote in the full House.

Both Democratic President Joe Biden and the top Republican in the House, Speaker Kevin McCarthy, were confident that they will get enough votes to pass it into law before June 5, when the U.S. Treasury Department says it will not have enough money to cover its obligations.

Some investors though remained apprehensive about the debt limit agreement, as some of the proposed bill’s provisions could undermine economic growth.

On the other hand, the U.S. Treasury’s expected issuance binge to build up its cash buffer will likely reduce market liquidity sharply, which could push short-term interest rates higher.

“We suspect these fears are likely overdone,” wrote Karl Schamotta, chief market strategist at Corpay in Toronto.

“Although there are some procedural landmines ahead that could impact the final wording, the impact on spending associated with the so-called ‘Fiscal Responsibility Act’ should be almost unnoticeable from a macroeconomic standpoint, leaving the government’s biggest outlays essentially unchanged,” Schamotta said.

With respect to the U.S. government’s expected flood of supply after the debt ceiling bill is passed, Schamotta noted that Treasury officials “are well-practised in slow-walking issuance or otherwise minimizing disruption around funding surges.”

Source link

Related Articles

Back to top button
bitcoin
Bitcoin (BTC) $ 98,797.47 1.02%
ethereum
Ethereum (ETH) $ 3,487.99 5.63%
tether
Tether (USDT) $ 1.00 0.04%
solana
Solana (SOL) $ 261.71 2.46%
bnb
BNB (BNB) $ 675.50 8.94%
xrp
XRP (XRP) $ 1.55 9.36%
dogecoin
Dogecoin (DOGE) $ 0.464012 16.65%
cardano
Cardano (ADA) $ 1.10 23.05%
usd-coin
USDC (USDC) $ 1.00 0.01%
staked-ether
Lido Staked Ether (STETH) $ 3,487.73 5.66%
tron
TRON (TRX) $ 0.222939 12.22%
avalanche-2
Avalanche (AVAX) $ 42.76 11.29%
shiba-inu
Shiba Inu (SHIB) $ 0.000028 11.72%
the-open-network
Toncoin (TON) $ 6.15 12.75%
wrapped-steth
Wrapped stETH (WSTETH) $ 4,111.78 5.16%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 98,649.43 1.11%
stellar
Stellar (XLM) $ 0.453727 55.52%
polkadot
Polkadot (DOT) $ 8.19 33.81%
chainlink
Chainlink (LINK) $ 17.60 16.78%
bitcoin-cash
Bitcoin Cash (BCH) $ 539.59 13.10%
sui
Sui (SUI) $ 3.65 3.66%
weth
WETH (WETH) $ 3,497.23 5.92%
pepe
Pepe (PEPE) $ 0.000022 8.91%
leo-token
LEO Token (LEO) $ 8.63 1.40%
near
NEAR Protocol (NEAR) $ 6.41 14.69%
litecoin
Litecoin (LTC) $ 102.90 15.76%
aptos
Aptos (APT) $ 12.98 9.66%
uniswap
Uniswap (UNI) $ 10.83 15.05%
wrapped-eeth
Wrapped eETH (WEETH) $ 3,675.99 5.76%
hedera-hashgraph
Hedera (HBAR) $ 0.150328 15.50%
internet-computer
Internet Computer (ICP) $ 11.47 17.11%
crypto-com-chain
Cronos (CRO) $ 0.201336 8.47%
usds
USDS (USDS) $ 1.00 0.21%
polygon-ecosystem-token
POL (ex-MATIC) (POL) $ 0.582762 28.75%
ethereum-classic
Ethereum Classic (ETC) $ 30.87 12.44%
render-token
Render (RENDER) $ 8.02 12.04%
kaspa
Kaspa (KAS) $ 0.161249 9.79%
bittensor
Bittensor (TAO) $ 542.97 11.13%
bonk
Bonk (BONK) $ 0.000051 2.64%
ethena-usde
Ethena USDe (USDE) $ 1.00 0.09%
fetch-ai
Artificial Superintelligence Alliance (FET) $ 1.44 16.69%
arbitrum
Arbitrum (ARB) $ 0.874702 9.96%
whitebit
WhiteBIT Coin (WBT) $ 24.68 0.04%
vechain
VeChain (VET) $ 0.043896 35.97%
dogwifcoin
dogwifhat (WIF) $ 3.54 12.39%
dai
Dai (DAI) $ 1.00 0.12%
mantra-dao
MANTRA (OM) $ 3.78 3.46%
cosmos
Cosmos Hub (ATOM) $ 8.26 17.01%
blockstack
Stacks (STX) $ 2.12 12.27%
filecoin
Filecoin (FIL) $ 5.30 14.85%