… but with US 10 year note yields at their lowest level since December and credit default swaps on US debt smack in the middle of recent ranges (see chart below), worrying about a US debt default because the Republicans are holding Obama’s feet to the fire in order to get budget cuts is a bit of a stretch. The bigger risk to the dollar would be blithely raising the debt limit while keeping the fiscal and monetary spigots wide open…
Q2 is at an end and serious efforts are underway to rein in unproductive government spending. Those are medium-term to long-term pluses for the dollar.
If recent history shows us anything, negotiations in Washington get done at the eleventh hour.August 2 is the Treasury’s drop-dead date before it exhausts its cash (it says). Expect negotiations to lag until we near mid-summer.
