Connect with us

Hi, what are you looking for?

Oracle of  Omaha SaysOracle of  Omaha Says

Editor's Pick

US debt ceiling raised after White House and Republicans reach tentative deal

After weeks of negotiating a deal to raise the debt limit to avert default, Democrats and Republicans announced a tentative deal has been reached. The plan is to put it to vote on Wednesday, but the optimism is there, and one can assume that from now on, the only thing to work on is details.

As I explained in this article, failure to raise the debt limit would have had tremendous negative implications for the US economy and financial markets. However, there was no precedent for not raising the debt limit, so, in the end, the outcome was the most logical one.

Why did the negotiations take so long?

Negotiating on the debt ceiling deal might be viewed as a strategy. The uncertainty created by not knowing if the US will be able to pay its debt usually sends people out of stocks and into bonds.

By buying bonds, the yields decline, thus making it more desirable for the US to issue new debt at a lower cost.

Here is the concept, explained a few years ago by non-other than the current Fed Chair, Jerome Powell:

Jerome Powell said the quiet part out loud back in 2011.

When they pass the debt ceiling the U.S. government needs to create chaos in Europe & the stock market, driving up demand for the newly issued government bonds.

This has always been the plan 🤫https://t.co/i5igwygzVo https://t.co/UO3NJdamz6 pic.twitter.com/PewNKsAEz7

— Financelot (@FinanceLancelot) May 27, 2023

What are the implications for financial markets?

The financial markets should love the agreement. The idea that the US would default on its debt, however unlikely it was, weighed on the stock market.

Therefore, at Monday’s opening, the first thing to see is the future to tick higher in a risk-on environment.

Such an environment should also trigger an upside reaction in some currency pairs, such as EUR/USD, AUD/USD, or NZD/USD. Also, the JPY crosses, such as AUD/JPY or EUR/JPY, should react too by making new highs when compared to Friday’s closing levels.

The post US debt ceiling raised after White House and Republicans reach tentative deal appeared first on Invezz.

Enter Your Information Below To Receive Free Trading Ideas, Latest News And Articles.






    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.
    Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

    You May Also Like

    Latest News

    A former Republican legislative candidate who traveled to Washington for former President Donald Trump’s ‘Stop the Steal’ rally was arrested Friday and charged with...

    Latest News

    Abbe Lowell, Hunter Biden’s attorney, filed an ethics complaint Friday against Georgia Rep. Marjorie Taylor Green after she displayed censured nude photos of the president’s...

    Stock

    Even as U.S. inflation broadly cools, frozen vegetable prices are hot. The average shelf price for frozen veggies rose by 18% in the past year...

    Latest News

    President Biden has overruled the Pentagon and chosen Adm. Lisa Franchetti to lead the Navy, making her the first woman, if she’s confirmed, to...

    Disclaimer: Oracleofomahasays.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


    Copyright © 2024 Oracleofomahasays.com