This debt ceiling fight is goint to be a real nail-biter . . . or worse. From Tom Luongo at tomluongo.me:
Now that we’re post-FOMC and ECB we have a clear playing field for another 6 weeks. The US debt ceiling theater is now center-stage along with completing the transition away from LIBOR, which will become an anachronism at the end of Q2.
SOFR will be the law of the land in the US come July. The change over from LIBOR is effectively complete with LIBOR-based Eurodollar Futures now consigned to the dustbin of history.
Markets will have to do without central bank drama for a month… whatever will we talk about?
Bank runs, I guess. But, I’m getting ahead of myself.
Both Powell at the Fed and Lagarde at the ECB hiked 25 bps as the markets had ‘priced in’ this week. But, I need to remind everyone that Powell held serve in all of his communications from last meeting. While everyone screamed “PIVOT!” during the Silicon Valley Bank debacle, Powell gave the markets nothing.
We got 25 bps and neutral language that so many people wanted to believe was a dovish statement, even though it wasn’t. We got an equally neutral statement and presser this month which the “pivoteers,” as Danielle Dimartino Booth calls them, keep trying to read the statement the way they want to rather than look at the picture as it is.
Powell will raise again in June. LIBOR’s swan song is currently the 3 month rate over SOFR. It’s been signaling 25 in May and another 25 in June for nearly two weeks.
Yea, this time CBDC is coming.