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In the event of a missed payment, the US has three days to cure
US CDS is based on treasuries (linked to a specific security - the co-called "reference obligation"), which according to the official offering document (see offering circular here), do not have a "grace period". Under such circumstances…
Becalmed Markets Conceal Rising Anxiety
The US dollar is narrowly mixed against major and emerging market currencies. Comments by House Speaker Boehner that he will form a majority bloc to avoid a default by the Federal government is being understood two ways.
Is the US shutdown bullish or bearish?
Safe assets are in short supply. If the US government shuts down for a long time, there will be a flight to quality. And the lack of safe assets will support the Treasury market.
Europe: Italy’s call for a stimulus – structural reform trade-off will happen
Backloaded austerity is the defining paradigm at work in Europe right now. Italian Prime Minister Enrico Letta has called for this paradigm to be bolstered by fiscal stimulus incentives as a quid pro quo for structural reform. I believe he…
Jobless claims suggest US GDP growth is peaking
Right now, US jobless claims are very low by recent historical standards. I believe this represents a peak for growth in this business cycle. But there are almost certainly seasonal adjustment problems with this data series. Despite…
Reaching for yield: HY spreads positively correlated to treasury yields
Here is further evidence that in this environment treasuries are driving "risk asset" valuations. Corporate HY bond spreads are now positively correlated to treasury yields. That's quite unusual because traditionally when treasury yields…