U.S. Govt Shutdown Is Bigger Risk Than Debt Limit: Compass Point
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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UUID: 7947283
(Bloomberg) -- The prospect of a govt shutdown “still poses a potentially serious downside risk for investors,” even as “our firm belief that the debt ceiling will be lifted removes a profound political risk from the landscape,” Compass Point strategists Isaac Boltansky and Lukas Davaz say in note.
- Trump’s commitment to securing funds for a border wall “dramatically raises the spectre of a shutdown in October” and his “injurious relationship” with Congressional Republican leadership “further complicates the underlying calculus”
- Four factors increase the potential for an equity market sell-off as govt shutdown risks intensify:
- Further delays confirmations, which would affect Trump’s deregulatory agenda; delivers a “psychological blow” to markets, serving as a “concrete symbol” of Washington’s inability to govern; delays legislative progress on tax reform; and could alters Fed’s policy normalization trajectory
- Compass Point says lawmakers will raise the debt ceiling in mid-September, yet there will likely be a govt shutdown in October
- NOTE: Oct. 5, Oct. 12 Treasury bills currently underperforming, yielding 1.130% and 1.133%, respectively, vs Oct. 19 at 1.107%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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To modify this alert, click here
UUID: 7947283