A political stalemate in Washington over raising the US debt ceiling has pushed the cost of buying insurance against a government default to its highest level in more than a decade, an early sign of market worries about the impasse.
The price of five-year credit default swaps — the most widely traded form of debt insurance — reached its highest since 2012 this month, although at 46 basis points, it remains well below levels during the 2008-09 financial crisis.
The new Republican leadership of the US House of Representatives is demanding deep budget cuts in exchange for raising the federal borrowing limit, but the White House has said it will not negotiate.
In 2011, a stand-off over the debt ceiling led to the US losing its top-notch triple A credit rating. While a default on US federal debt is still viewed as unlikely, investors are moving to protect against, or profit from, the possibility.
US Treasury secretary Janet Yellen has warned that a default, which could theoretically come as early as June, would lead to “catastrophe”. She is set to speak today at the IMF and World Bank spring meetings in Washington.
Apart from that, here’s what else I’ll be keeping tabs on today:
Results: Citi, JPMorgan Chase, Wells Fargo and BlackRock report. Read this preview of what to expect.
Economic data: The University of Michigan updates its consumer sentiment index and March retail sales are also published.
Monetary policy: Federal Reserve governor Christopher Waller will deliver a speech about the US economic outlook at a conference in Texas.
G7 foreign ministers meet: Talks at the gathering in the hot spring resort of Karuizawa, Japan, on Sunday are expected to focus on Ukraine, China and North Korea.
Five more top stories
1. The FBI arrested a 21-year-old junior military employee yesterday over a recent leak of more than 100 highly classified US intelligence documents, which appeared on messaging platform Discord before spreading to Telegram and Twitter. Read more about the suspect, Air Guardsman Jack Teixeira.
Explainer: Here’s what we know so far about the leaked documents and why the Pentagon is rushing to contain the fallout.
2. EXCLUSIVE: One of Charles Schwab’s largest investors sold its entire $1.4bn stake during last month’s banking turmoil amid fears over paper losses on the brokerage group’s bond portfolio following the collapse of Silicon Valley Bank. Read more about the move by GQG Partners.
3. EXCLUSIVE: Singapore has asked banks to keep quiet on the origins of huge wealth inflows to the city in a tacit reference to China. Regulators gave the directive at a meeting with local banks and international lenders such as UBS, JPMorgan and Citigroup.
4. Brazil’s president called for an end to trade dependence on the US dollar ahead of a meeting with Chinese president Xi Jinping in Beijing today. Luiz Inácio Lula da Silva’s appeal for developing countries to use their own currencies dovetails with the Chinese government’s efforts to promote use of the renminbi in global commerce.
5. The co-founder of Apollo Global Management, Josh Harris, is nearing an agreement to buy the Washington Commanders in a deal that values the NFL football franchise at $6bn, according to people familiar with the matter. That price tag would make the Commanders the most expensive sports team ever sold. Read more on the talks and sign up to our Scoreboard newsletter for the latest news on the sports business.
How well did you keep up with the news this week? Take our quiz.
The Big Read
Intel’s fateful bet a decade ago against extreme lithography, which promised unparalleled miniaturisation, turned out to be a historic mistake. This year, it plans to finally use the technology to produce large volumes of chips. At a time when the US has placed advanced chips at the centre of national policy, can Intel regain its lead?
We’re also reading . . .
Richard Waters: Larry Ellison’s stealthy takeover of Oracle has turned into one of the software industry’s most intriguing, though least-noticed, sagas.
Trade: A year ago Janet Yellen launched a new buzzword into the financial lexicon: “friend-shoring”. Fast forward to 2023 and the concept is causing concern, writes Gillian Tett.
Elephant deaths: In Kenya, a surge in clashes between wildlife and an expanding agriculture industry is placing the pachyderms in peril.
Chart of the day
The euro has risen to its highest level in a year against the dollar, with investors hoping that falling inflation will persuade the US Federal Reserve to moderate the pace of interest rate rises while expecting a more hawkish approach from the European Central Bank.
Take a break from the news
The pistachio green, Art Deco, Pelican hotel in Miami has a prime South Beach spot and has just emerged from a two-year renovation. Its famously eccentric rooms have been overhauled and brought back to a shimmering gloss. Take a look inside.
Additional contributions by Tee Zhuo and Emily Goldberg
Source: Economy - ft.com
