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Substance of Debt Ceiling Deal Has Implications for Banking System and Sovereign Backstop
452 Views29 May 2023 03:38
SUMMARY
- Since 1995, US equity prices have displayed a remarkable resilience to political impasses in raising the debt ceiling. Dysfunctional fiscal policy can have unintended consequences, such as sovereign debt downgrades.
- Elevated levels of bond holdings in the US banking system mean that profligate US fiscal policy could raise issues about the quality of the sovereign backstop.
- US banks are still losing deposits to money market funds as banks struggle to adjust to a higher cost of funding environment. Commercial real estate lending has softened since March.
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- Substance of Debt Ceiling Deal Has Implications for Banking System and Sovereign Backstop29 May 2023
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