Daily Archives: February 22, 2011

James Politi

The biggest open question for US fiscal policy in the long run is whether the political system can forge a consensus to rein in the long-term debt through some combination of spending cuts and tax increases.

But in the short-term, at least for the next ten days, it is whether the US government is facing its first shutdown since the mid 1990s.

On March 4, the “continuing resolution” funding the government for the current fiscal year, which runs through September, will expire.

Unless a deal is approved by the Republican House, the Democratic Senate, and the White House, all non-essential federal operations will have to close, which could, if the standoff is lengthy, have significant consequences for the US economy. Read more

Robin Harding

Yes it does, according to a new working paper from a group of Chinese and Swiss academics, published as a preprint.

Using both monthly and weekly data, we found very similar lead-lag dependence between the S&P500 stock market index and the yields of bonds inside two groups: bond yields of short-term maturities (Federal funds rate (FFR), 3M, 6M, 1Y, 2Y, and 3Y) and bond yields of long-term maturities (5Y, 7Y, 10Y, and 20Y)….First, the stock market and yields move in the same direction. Second, the stock market leads the yields, including and especially the FFR.

 Read more

Eurozone price rises sound alarms at ECB – FT

Libya turmoil crushes risk appetite – FT Read more