Don’t Be Too Excited For A Deal. A Debt Ceiling Deal Could Spell Bad News For The Market
Mondeum Capital (UK) Limited
A U.S. default on its debt would have disastrous consequences for the stock markets and bond yields, causing investors to be on edge as politicians work to reach a compromise before the U.S. Treasury runs out of cash to pay its bills. However, a debt-ceiling deal won’t necessarily be all good news for investors or the U.S. economy, as Republicans are pushing for sharp spending cuts at a time when the economy is appearing to slow down.
Additionally, there will be a flood of Treasury issuance after the deal isreached, which will drain liquidity from markets and weigh on risk assets. The potentialbig cuts to government spending could also result in slower economic growth in 2024 and beyond.
The Treasury will need to immediately rebuild its cash balance in the General Account after a deal is reached, which means a flood of Treasury bill issuance in early June that could increase yields and pull cash out of the system, leading to liquidity tightening. While any deal to lift the debt ceiling would be betterthan no deal, it won’t necessarily be an all-clear signal for markets beyond a short-term bounce.
This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.
Featured CoursesRecent news
D-Wave Stock Rises 2.7% Despite 81% Revenue Drop: Here’s Why
Despite D-Wave Quantum’s 81% revenue drop, shares rose 2.7% in premarket trading. Investors focused on a jump in bookings, indicating real business progress. Here’s a look at the numbers and why the company’s outlook matters more than its recent performance. First-quarter revenue fell to $2.86 million, down from last year and below the $4.2 million […]
GameStop Shares Drop 4.7% After eBay Turns Down $56B Takeover Offer
eBay swiftly rejected GameStop’s $56 billion takeover bid, calling it neither credible nor attractive. GameStop shares fell 4.7% in premarket trading. This decision raises questions about what it means for both companies and whether Ryan Cohen will give up or try again. Most investors were not surprised. Since the bid was announced, eBay’s stock traded […]
Hims Stock Drops 14.6% After Posting an Unexpected Loss
Hims and Hers Health’s latest results disappointed investors. Shares dropped 14.6% in premarket trading on Tuesday. The company posted a first-quarter loss, catching analysts off guard. They had expected a profit. Here’s a look at what happened, what the company’s guidance means for the future, and whether the stock’s sharp drop is justified. The subscriber […]
Trade with fewer limits
Day trade with fewer limits at fast speed. Buy stocks and ETFs at low fees.