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Financial Conditions Rise to Record on Debt Deal

October 16, 2013
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U.S. financial conditions climbed to the highest level on record as the Senate crafted a deal to raise the debt ceiling and avert a default.

The Bloomberg U.S. Financial Conditions Index increased 0.10 to 1.51, the highest in records dating back to January 1994. The gauge measures stress in the markets by combining everything from money-market rates to yields on government and corporate bonds to volatility in equities. During the debt- ceiling debate of August 2011, the index fell as low as negative 1.631.

The measure rose from last week’s one-month low of 1.16 as the Senate and House plan to vote as soon as today on the agreement that would end the 16-day-old government shutdown and allow the U.S. to continue borrowing, a day before its authority lapses. House Republicans today signaled that they will let the accord pass largely with Democratic votes.

"Everyone is basically assuming we’re going to get a vote on a deal sometime today, if not in the next few hours," Mark McDonnell, a senior money manager at Hillswick Asset Management LLC in Stamford, Connecticut, which manages $1.3 billion, said in a telephone interview.

The Senate compromise would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7.




One-month Treasury rates fell 20.8 basis points to 0.14 percent at 4:12 p.m. in New York after touching 0.45 percent, according to data compiled by Bloomberg. The benchmark 10-year yield fell 6 basis points to 2.66 percent, according to Bloomberg Bond Trader data.




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