Debt Ceiling Agreement Pushes Reckoning Out To?

Washington is not known for making tough financial decisions and this week was no exception. The 2 year suspension of the debt ceiling definitely will increase the supply of Treasuries in coming years. The lack of fiscal discipline seems like a de facto embrace of Modern Monetary Theory. So, are Treasury yields spiking? Not yet. Global growth worries remain, along with more extraordinarily accommodative central bank stimulus. Today’s alarm signal was German manufacturing PMI at a 7 year low, prompting the ECB to most likely cut rates again tomorrow. Negative yielding bonds in Japan and Europe make a 2.00% 10 year T look good. Next week should be interesting with the senate vote on the debt ceiling on Tuesday (assuming the House passes this week), followed by the most telegraphed rate cut in recent history next Wednesday, July 31. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners