25 july 2011
WASHINGTON:Republicans andDemocrats prepared duelling plans for raising theUS debt ceiling, unable to break a partisan stalemate over how to tackle the nation's $14.3 trillion debt and quell market concerns about a potential default August 2. House Speaker John Boehner of Ohio told fellow Republicans he was determined to force action on a two-step debt-limit extension that would provide a roughly $1 trillion, shorter-term increase than President Barack Obama has requested, defying a veto threat and the administration's warnings of dire economic consequences. He aimed to unveil his plan on Monday, when he was to update Republicans in a closeddoor meeting in the Capitol.
The Senate's top Democrat Harry Reid, meanwhile, readied his own proposal, which would hand Obama the full $2.4 trillion in additional borrowing authority he has requested - enough to last through the 2012 elections -tied to a $2.7 trillion package of spending cuts that would leave Medicare and Medicaid untouched, according to a Senate Democratic aide. US stock futures and Treasuries slid in London as the lack of an agreement on raising the federal debt limit intensified concern of a default. The dollar weakened against yen and Swiss franc.
"From the markets' point of view, a two-stage plan is a nonstarter because we now know it is amateur hour on Capitol Hill and we don't want to be painted in this corner again," said Christian Cooper, head of US dollar derivatives trading in New York at Jefferies & Co. "There is significant risk of a downgrade with a deal that ties further cuts to another vote only a few months down the road given the significant resistance to do the right thing now," Cooper said. Treasuries fell after Mohamed A. El-Erian , whose Pacific Investment Management Co. runs the world's biggest bond fund, said the US may lose its AAA debt rating even if lawmakers reach a plan to avoid a default.
Ten-year yields rose two basis points to 2.98% as of 8:48 a.m. in London, according to Bloomberg Bond Trader pricing. The yield increased six basis points last week. It is still below the 10-year average of 4.06%. "In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable ," El-Erian , the Newport Beach, California-based chief executive officer and co-chief investment officer at Pimco, wrote in an e-mail .
WASHINGTON:Republicans andDemocrats prepared duelling plans for raising theUS debt ceiling, unable to break a partisan stalemate over how to tackle the nation's $14.3 trillion debt and quell market concerns about a potential default August 2. House Speaker John Boehner of Ohio told fellow Republicans he was determined to force action on a two-step debt-limit extension that would provide a roughly $1 trillion, shorter-term increase than President Barack Obama has requested, defying a veto threat and the administration's warnings of dire economic consequences. He aimed to unveil his plan on Monday, when he was to update Republicans in a closeddoor meeting in the Capitol.
The Senate's top Democrat Harry Reid, meanwhile, readied his own proposal, which would hand Obama the full $2.4 trillion in additional borrowing authority he has requested - enough to last through the 2012 elections -tied to a $2.7 trillion package of spending cuts that would leave Medicare and Medicaid untouched, according to a Senate Democratic aide. US stock futures and Treasuries slid in London as the lack of an agreement on raising the federal debt limit intensified concern of a default. The dollar weakened against yen and Swiss franc.
"From the markets' point of view, a two-stage plan is a nonstarter because we now know it is amateur hour on Capitol Hill and we don't want to be painted in this corner again," said Christian Cooper, head of US dollar derivatives trading in New York at Jefferies & Co. "There is significant risk of a downgrade with a deal that ties further cuts to another vote only a few months down the road given the significant resistance to do the right thing now," Cooper said. Treasuries fell after Mohamed A. El-Erian , whose Pacific Investment Management Co. runs the world's biggest bond fund, said the US may lose its AAA debt rating even if lawmakers reach a plan to avoid a default.
Ten-year yields rose two basis points to 2.98% as of 8:48 a.m. in London, according to Bloomberg Bond Trader pricing. The yield increased six basis points last week. It is still below the 10-year average of 4.06%. "In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable ," El-Erian , the Newport Beach, California-based chief executive officer and co-chief investment officer at Pimco, wrote in an e-mail .
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