The U.S. debt ceiling impasse is causing ructions in the short end of the debt market, with Tuesday’s $35 billion auction of 21-day cash management bills requiring a whopping 6.2% high yield. This, combined with surprisingly buoyant soundings on global business activity and some spiky inflation readouts, has caused talk of further Federal Reserve tightening to return.
Wall St stock indices fell back more than 1% on Tuesday and futures remain in the red ahead of Wednesday’s open. Asian and European bourses have also fallen by similar amounts.
The pressure on the Bank of England to tighten further has mounted after news that Britain’s stubbornly high inflation rate fell by less than expected last month and a closely watched measure of core price rises surged to a 31-year high. Money markets are now pricing a rise in BoE policy rates rising another 75 basis points to 5.25% by September.
The artificial intelligence frenzy will be tested with results from chipmaker NVIDIA later on Wednesday. Minutes from the Federal Reserve’s most recent Federal Open Market Committee meeting will also be released, as well as speeches from Federal Reserve Board Governor Christopher Waller, European Central Bank President Christine Lagarde, and Bank of England governor Andrew Bailey.