LONDON, Oct 16 (Reuters) – Investors who believe Washington
would strike an 11th hour deal on the budget and avoid default
may be forced to think again and scramble for trades to hedge
their U.S. sovereign debt and dollar exposure.
The United States is hours away from exhausting its
borrowing capacity, though lawmakers were said to be close to
agreement. Failure to reach a deal by the Oct. 17 deadline would
pave the way for a default that could cause havoc in global
Societe Generale: Since 1 October, each week of the U.S. shutdown has shaved about 0.1%-0.25% from GDP growth
“Perhaps 1am is the new midnight.” – from a Deutsche note
LONDON, Oct 11 (Reuters) – Economic uncertainty from the
U.S. budget impasse and the government shutdown is introducing a
new policy risk to investors: instead of tapering, could the
Federal Reserve actually boost monetary stimulus?
Although not yet a mainstream market assumption, the chance
that U.S. monetary policy could move in either direction may
encourage investors to shift their portfolios in favour of safer
government bonds – and away from U.S. stocks which had led the
rally earlier this year.