FirstFT: US debt ceiling impasse pushes price of insuring against default to 11-year high

A political stalemate in Washington over elevating the US debt ceiling has pushed the price of shopping for insurance coverage in opposition to a authorities default to its highest level in more than a decade, an early signal of market worries in regards to the deadlock.

The value of five-year credit score default swaps — probably the most extensively traded type of debt insurance coverage — reached its highest since 2012 this month, though at 46 foundation factors, it stays properly under ranges in the course of the 2008-09 monetary disaster.

The brand new Republican management of the US Home of Representatives is demanding deep funds cuts in trade for elevating the federal borrowing restrict, however the White Home has stated it won’t negotiate.

In 2011, a stand-off over the debt ceiling led to the US dropping its top-notch triple A credit standing. Whereas a default on US federal debt continues to be considered as unlikely, traders are shifting to guard in opposition to, or revenue from, the chance.

US Treasury secretary Janet Yellen has warned {that a} default, which might theoretically come as early as June, would result in “disaster”. She is ready to talk at present on the IMF and World Financial institution spring conferences in Washington.

Aside from that, right here’s what else I’ll be maintaining tabs on at present:

• Outcomes: Citi, JPMorgan Chase, Wells Fargo and BlackRock report.

• France: The nation’s Constitutional Council guidelines on President Emmanuel Macron’s controversial plan to boost the retirement age.

• ECB: The European Central Financial institution releases long-term rates of interest statistics for final month.

Be a part of award-winning FT columnist Stephen Bush and colleagues on-line on April 19 as they sort out your questions within the run-up to the UK’s 2024 election. Register here for free.

5 extra prime tales

1. The FBI arrested a 21-year-old junior navy worker yesterday over a latest leak of greater than 100 extremely categorized US intelligence paperwork, which appeared on messaging platform Discord earlier than spreading to Telegram and Twitter. Read more about the suspect, Air Guardsman Jack Teixeira.

2. EXCLUSIVE: One in every of Charles Schwab’s largest traders bought its complete $1.4bn stake throughout final month’s banking turmoil amid fears over paper losses on the brokerage large’s bond portfolio following the collapse of Silicon Valley Financial institution. Read more about the move by GQG Partners.

3. EXCLUSIVE: Singapore has requested banks to maintain quiet on the origins of big wealth inflows to the town in a tacit reference to China. Regulators gave the directive at a gathering with local banks and international lenders such as UBS, JPMorgan and Citigroup.

4. Brazil’s president known as for an finish to commerce dependence on the US greenback forward of a gathering with Chinese language president Xi Jinping at present. Luiz Inácio Lula da Silva’s enchantment for growing nations to make use of their very own currencies dovetails with Beijing’s efforts to promote use of the renminbi in global commerce.

5. The UK’s slowing labour market is lifting hopes that inflationary pressures are easing, however economists stated the tentative knowledge won’t be sturdy sufficient to steer the Financial institution of England to pause its rate of interest rises. Here’s what central bank officials will be looking at in the latest jobs data.

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The Huge Learn

Intel’s fateful guess a decade in the past in opposition to excessive lithography, which promised unparalleled miniaturisation, turned out to be a historic mistake. This yr, it plans to lastly use the know-how to supply massive volumes of chips. At a time when the US has positioned superior chips on the centre of nationwide coverage, can Intel regain its lead?

We’re additionally studying . . . 

Chart of the day

The euro has risen to its highest level in a year against the dollar, with traders hoping that falling inflation will persuade the US Federal Reserve to reasonable the tempo of rate of interest rises whereas anticipating a extra hawkish strategy from the European Central Financial institution.

Take a break from the information

The Pelican resort in Miami has a chief South Seashore spot and is housed in one of many Artwork Deco buildings the place tour guides wish to cease. It’s pistachio inexperienced, with 32 rooms and no pool or spa, however that doesn’t matter. The resort has simply emerged from a two-year renovation, its eccentric rooms overhauled and introduced again to a shimmering gloss. Take a look at the one-of-a-kind rooms.

Extra contributions by Emily Goldberg