Three-month Treasury yields are at the highest level in more than two decades amid heightened risk of a default if Congress fails to lift the debt ceiling on time.
The government sold $57 billion of the three-month securities at 5.14%, the highest for the benchmark since 2001.
Recent Treasury auctions have suggested a level of increased concern stretching from June through the summer about the debt ceiling.
Almost all believe a default would cause a major disruption for the global economies, perhaps causing systemic changes.
Will today’s high-profile meeting between President Biden and House Speaker McCarthy produce any results?
Equites struggled to find direction in subdued trading as volume was about 20% below recent averages according to Bloomberg.
Goldman wrote that techs stocks are now trading at a 49% premium to the rest of the S & P 500, reiterating only five mega sized tech companies were responsible for 80% of 2023 S & P 500 gains.
Since mid-April, equites have traded sideways even as earnings have generally exceeded dumbed down expectations. Goldman expressed concern about the narrowness of the advance, suggesting volatility can increase dramatically with little catalyst.
Commenting about potential monetary policy, swap rates were little changed indicating a policy rate about 70 bps below the current one by year end. Goldman however altered its view on policy now believing that the Fed will be less aggressive in cutting rates this year than markets are predicting, inferring no policy change may occur.
Last night the foreign markets were down. London was down 0.42%, Paris down 0.90% and Frankfurt down 0.28%. China was down 1.01%, Japan up 1.01% and Hang Seng down 2.12%.
Futures are down about 0.4% on Chinese data suggesting that imports declined last month and nervousness over the debt ceiling. Tomorrow the CPI is released, and inflation is expected to rise by 5.0% on a year-on-year basis. The 10-year is up 6/32 to yield 3.48%.
