2023-05-25 08:45:29
Win a last-minute debt ceiling deal.
US President Biden and Republican House of Representatives Speaker McCarthy meets earlier this week. But it has yet to reach an agreement on raising the US government debt ceiling from $31.4 trillion. Both parties will continue to discuss. To avoid defaults on debt payments by the US Treasury Secretary. warned that the first day the US government May default on debt payments on June 1 if there is no increase in the debt ceiling. U.S. government debt default scenario It is an event that has very little chance of happening, but if it does, it will have a huge impact. while no one truly benefits by retirees Some 66 million people with disabilities and others rely on monthly Social Security benefits. As for the global financial market, there will be severe turbulence.
in the context of exchange rates The closer the time is to the deadline The greater the risk of turmoil in the financial markets. The surge in market volatility will cause investors to avoid risky assets and emerging market currencies, including the baht. which will support the dollar in the beginning But we believe that the strength of the dollar will be temporary as market turmoil may prompt the Federal Reserve to cut interest rates faster. The yen will appreciate significantly. This event is different from the debt ceiling crisis in 2011 or the temporary government shutdown in 2013 in which the Fed interest rate was close to 0%, but at present it is at 5.00-5.25%, so there is room to reduce interest if necessary. Debt completed before the deadline We see the market response to be limited as it was expected by most of the market participants. Only the bond market reflected its risks through avoiding near-term Treasury bills. (Graph below), but other assets Overall, this does not indicate too much concern.
By the time the government leaders and the Speaker of the House of Representatives The debt ceiling deal can be closed. The deal must be approved by both the House of Representatives and the Senate, with Republicans holding a 222-to-213 majority in the House of Representatives. and Democrats hold a 51-to-49 majority in the Senate. following passing two councils President Biden will sign it into law in time. In this round, it is considered a big bet. The US bond market is nearly $25 trillion, compared to $9 trillion in 2011. Millions of global contracts are linked to US bonds. While reducing spending today is more necessary. But the political and social context faces more challenges amid the US’s aging population. Compared to a decade ago, in addition, regional banking problems The risk of an economic recession And geopolitical factors add to the complexity. In the long term, the massive indebtedness and the risk of frequent defaults undermine the credibility of US bonds.
By Mr. Rung Sanguanruang
senior director Global Markets Promotion Executive Bank of Ayudhya Public Company Limited
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