default

James Politi

In Ben Bernanke’s testimony before the Senate banking committee today, there was plenty of talk about US fiscal and budgetary policy.

It’s the hot topic on Capitol Hill, with Congress moving this week towards a deal to cut spending by $4bn and avert a government shutdown – at least for two weeks.

Needless to say, in the question-and-answer session, lawmakers from both parties were desperately trying to get the Federal Reserve chairman’s approval for their positions.

Republicans are advocating for aggressive cuts in discretionary spending, while Democrats, in the words of Harry Reid, the Senate majority leader, want to apply a ”scalpel” rather than a “meat axe” to the US budget. Read more

James Politi

The US is little more than $200bn away – or about 2 months – away from reaching its congressionally mandated national debt limit of $14,300bn.

The need to increase it to avoid a potentially disastrous US default is the next fiscal battleground in Washington, after the lawmakers stop squabbling over a government shutdown.

Republicans want to use the opportunity to push for more spending cuts, while Democrats say this is not the place to negotiate.

On Thursday, Moody’s Investors Service offered its analysis of the likelihood that a major crisis will ensue, threatening America’s triple-A credit rating much earlier than even the most ardent fiscal hawks would imagine. Read more

Not one eurozone country deserved a credit rating upgrade in the past quarter, while some, such as Spain, deserved six-notch downgrades, new data show. Indeed, 13 of the worst-performing 15 countries were European (see Q-o-Q change column; source: CMA data).

The UK, by contrast, did deserve a one-notch upgrade. (The bad news is that even an upgrade leaves the UK’s implied rating one notch below its actual rating of AAA.) Far greater winners were Guatemala, Uruguay, Egypt, Bahrain and Colombia, which all merited multi-notch upgrades. Read more

The Greek cold has turned into ‘flu, and Portugal has started sneezing.

The Greek government’s cost of debt rose dramatically today, and the cost of insuring that debt rose with it —spectacularly. Greek 1-year credit default swaps are trading (very thinly) at an all-time high of 1000 basis points, according to Markit data; a 57 per cent rise in a day. It now costs €1m to insure €10m 1-year debt. The markets are effectively pricing in a debt restructure within the year. Read more

The cost of government debt is rising almost vertically in Greece today, and rumour has it that no-one is selling insurance against the debt’s default.

This follows news of a worse-than-expected Greek budget deficit of 13.6 per cent. Previous estimates pinned the deficit at 12.9 per cent. Read more