Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the Republican-dominated lower house of Representatives is set to vote on a budget deficit reduction plan later this morning.
Markets are watching the results of the vote closely, although the outcome is no sure thing given a revolt by Tea Party Republicans against the plan in recent days.
However, even if that plan does succeed in the lower house, the Democratic-dominated upper house has vowed to reject the bill and Barack Obama is opposed to it because it does not include tax increases. See more here on the Congressional dramas at CNN.
Congressional leaders are again set to burn the midnight oil through the weekend in an increasingly desperate attempt to find a deal to raise America's debt ceiling before the August 2 deadline, which is Wednesday morning New Zealand time.
Meanwhile, the US Treasury has devised a plan to ensure that interest payments are prioritised after August 2 so America does not default, but that may mean other payments such as social security or payments to contractors are not made. See more here at Bloomberg.
The Dow closed down more than 0.5%, adding to its slump on Wednesday night. See more here at Bloomberg.
The New Zealand dollar also fell as nervousness on global markets rose, meaning some investors removed some of their 'riskier' bets from the table. It dipped below 87 USc, but is well supported as the US dollar weakness took it to post-war lows against the Yen and Swiss Franc. See more here on the weak US dollar at Bloomberg.
Ironically, that meant stronger demand for safe haven assets such as US Treasuries, which are the very securities most at risk of a US default.
Go figure, as the Americans say.
The US 10 year Treasury yield fell 3 basis points to a 1 month low of 2.96%. See more here at Bloomberg.
Although, the cost of insuring these bonds on Credit Default Swap markets rose again overnight.This cost to insure US sovereign debt is now slightly below the cost of insuring NZ sovereign debt, even though New Zealand's credit rating at AA+ is still below America's AAA rating, although that rating is now seen in danger of being downgraded.
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