In fact, a risk for financial markets is that the Treasury Department and Federal Reserve may “add fuel to the fire by publicly emphasizing the risks to the market and the economy, rather than offering their usual measured reassurance during times of stress,” warned John Lynch, chief investment officer at Comerica Wealth Management, in a note. Read: Why it might take ‘a stock-market meltdown’ to resolve the debt-ceiling standoff ![]() And some observers fear a resolution may not arrive until a significant stock-market downturn or other financial ructions occur that would spook politicians to make a deal. Some past showdowns have been accompanied by significant stock-market volatility. Equity markets have thus far shrugged off any concerns on this topic, but that could change if 1-month Treasuries drift higher,” he wrote. “As we get closer to the June 1 deadline set out by Secretary Yellen, we will watch to see how 1-months trade. The bill’s performance signals reluctance to hold debt that could be affected by a potential default seen taking place as early as June 1 if the standoff isn’t resolved.Ĭolas has called 1-month T-bills “the most important security in the world just now,” continuing to reflect a “nonzero chance” of a technical default on U.S. See: Biden describes debt-ceiling meeting as ‘productive,’ but McCarthy says he ‘didn’t see any new movement’įinished a choppy session up 0.5%Wednesday, while the Dow Jones Industrial Averageįell around 30 points, or 0.1%, and the Nasdaq CompositeĪt the same time, there has been more volatility in short-term Treasury bills, usually a sleepy corner of financial markets, with the yield on the 1-month instrument rising above the fed-funds rate, which stands at 5% to 5.25%. Biden and congressional leaders met for the first time in weeks late Monday, but produced no breakthroughs. ![]() Treasury Secretary Janet Yellen has warned that those measures could be exhausted as early as June 1, potentially triggering a first-ever federal default.Ĭongressional Republicans have insisted that any debt-limit increase be accompanied by wide-ranging spending cuts, while President Joe Biden and congressional Democrats have called for a “clean” raise. government in January bumped up against the $31.4 trillion debt limit, prompting the Treasury department to begin using special measures to manage the government’s finances. According to the Treasury Department, Congress has acted 78 separate times since 1960 to permanently raise, temporarily extend, or revise the definition of the debt limit. government debt against default to record highs, but so far there’s little sign stock-market investors are losing sleep over a standoff that, if left unresolved, could see the federal government default by early next month.Ī default is widely described as potentially catastrophic, but investor fatigue is understandable. Treasury market and sent the cost of insuring U.S. Brinkmanship around the federal debt limit has roiled parts of the U.S.
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