Global Market – U.S. debt ceiling limit – Impact on Interest rate
This week we will discuss U.S. debt ceiling limit and its impact on interest rate. We will discuss various scenarios and its potential impact on U.S. interest rate and its global impact on economy.
U.S. debt ceiling limit – 3 probabilities
1) U.S. mange to raise debt ceiling limit
2) U.S. failed to raise debt by 1st week of June but manages to increase debt limit before 15-Jun-23 – When interest payment of $2 billion is due.
3) U.S. fails to raise debt ceiling limit before it hit the limit and eventually government defaults
Current U.S. debt ceiling limit is at $31.4 trillion
U.S. Congress voted to increase it by $2.5 trillion, which President Biden signed into effect on December 16, 2021. At that point, it was set at about $31.4 trillion. On January 19, 2023, the United States hit its debt ceiling of $31.4 trillion. U.S. debt ceiling limit is expected to hit by 1st June or by first week of June.
Equichain Wealth Advisors: Market View & Opinion
Currently market is factoring in U.S. to finalize a deal on debt ceiling and probability of 2nd and 3rd outcome is rare and not factored-in by market.
We do believe that in any case U.S. will increase the debt ceiling limit as failing to do so will have far reaching consequences. We do believe it will put pressure on interest rate and there will be risk of banking crisis in U.S. regional banks as it remains venerable to high interest rate.