Equity and bond markets have calmed since last month’s regional bank failures sparked contagion fears, but political brinkmanship over the U.S. debt ceiling risks reigniting volatility, warns CreditSights.
“There has been no discernible progress made on a deal, which is likely to result in debt ceiling negotiations coming down to the wire once again,” CreditSights analysts led by global head of strategy Winnie Cisar said in a note Monday. In the chart below, CreditSights tracked volatility in equities, interest rates and the currency market, using the Cboe Volatility Index, known as the VIX, as well as the bond market’s ICE BofAML MOVE index and the J.P. Morgan Global FX Volatility index, according to the report.
See: McCarthy calls for Biden to negotiate on raising debt limit, rather than ‘bumble into’ the first U.S. default U.S. stocks were trading modestly higher Monday afternoon, with the Dow Jones Industrial Average DJIA and S&P 500 SPX and Nasdaq Composite COMP each up around 0.2%, according to FactSet data, at last check. The U.S. stock market has risen so for this year, with the S&P 500 climbing 8% based on Monday afternoon trading levels.
It could wind up being similar to the “showdown” in 2011 that led to a downgrade of the federal government’s credit rating, “financial market turmoil and lasting negative effects on the economy,” they said.
JonChevreau -$32T US debt threatens our entire country.
“Brinksmanship”. Both sides, amiright? 😉