The U.S. govt borrowing ceiling deadlock must be resolved quickly. Tuesday’s meeting between President Joe Biden & Congressional leaders aims to find a middle ground between raising the debt ceiling and averting a catastrophic default.
In an unprecedented moment, short-term govt borrowing costs are climbing towards the solid 6% mark. This rate is very close to what one would expect to spend on a 30-year mortgage, all with the risk that entails.
The gap in the middle of the yield on the four-week T-bill, which is ostensibly the safest investment on earth, and the cost of a thirty-year mortgage is at its most narrow on record, at around 75 basis points, as the Fed has increased interest rates over the past year. The yield on the 30-year Treasury bond is merely 3.8%.
While there is a significant element of “perhaps, he might say that, right?” in Biden’s statement that he is sure that a resolution will be reached. Investors have their fingers crossed for the best but getting ready for the worse, as shown by the markets.
S&P Global Market Intelligence claimed the price of insurance against a U.S. debt default has risen to its highest level since 2009, costing about $7.20 for every $100 value of Treasuries.
The premium to insure $100 of the nation’s sovereign debt today, however, is $597.
This is especially true after the weekend’s hotly disputed presidential election, which will now go to a run-off.
President Tayyip Erdogan is ahead of opposition competitor Kemal Kilicdaroglu in the current largest political contest of his 20-year rule, nevertheless, the election on Sunday fell short of an absolute majority.
The market is not pleased. In order to prevent the market from going crazy, trading in the Turkish blue-chip shares was briefly suspended after the lira fell to its lowest level in two months versus the dollar.
To put it mildly, the atmosphere is tense.
These worries haven’t yet spread to the tech industry, which is maintaining a fairly steady course. According to a regulatory document made by George Soros’ office on Friday, the 92-yr-old investor’s whole position in Tesla has been sold. In 2022, Soros invested in convertible bonds and shares of the Elon Musk-led electric vehicle manufacturer.
After six months of battling with the firm’s shareholders during which time Tesla lost roughly 40% of its worth, Musk finally agreed to pay $44 bln for Twitter. Tesla shares circled $274 when Soros purchased the position in the 2Q of last year, and barely $173 when he sold it in the first few months of this year.
In the initial three months of the season, Soros wasn’t the only investor to sell off some of the hot commodities from the epidemic era. According to Bank of America’s every-seven-days Flow Show record, during the first quarter, the banking industry experienced its worst upheaval in years, with the failure of techno lender Silicon Valley Bank at its centre.
So far in the second quarter, that has changed. According to BofA, the tech funds experienced their largest inflow since around December 2021 in the week ending May 10. Do not fret excessively about Soros shedding off the Big Tech Bounce. According to Friday’s regulatory submission, he also purchased significant amounts of Netflix, Qualcomm, Uber, and Snowflake, which is a cloud data firm that fellow 92-year-old billionaire Warren Buffett invested in back in 2020.
Important developments that should give American markets a more solid direction later on Monday include:
* The April New York Fed’s Manufacturing Index.
* Raphael Bostic, the president of the Federal Reserve Bank in Atlanta, to appear in a live show and interview on CNBC.
* Remarks by Bostic, Neel Kashkari of the Minneapolis Federal Reserve, and Thomas Barkin of the Richmond Federal Reserve at the Federal Reserve Bank in Atlanta’s 2023 – Financial Markets’ Conference.