Deadlock

We were discussing about the US shutdown and it doesn't look like they're deciding on a solution anytime soon. 10 days away from the much anticipated day - when US may possibly default on their debt obligations - market looks rather anxious and a little choppy from the uncertainty.

Reading through history, this is not the first time and for the past few times that this has occurred, they have never failed to raise the debt ceiling and I don't see why they wouldn't this time around. Given that the alternative to that is a default. In a desperate case like this, it's probably best to decide on short-term goal, think later.

To be honest, the outcome is 50-50 given the situation right now. But if come next week and they do not have a decision, the only logical thing that would happen is a rise in the borrowing cost (ie: interest rate) to fund that delayed debt obligations that needs to be fulfilled. And then you start thinking, if it is really a default, Obama would be the first US President in the history to default on debt obligations. Debt obligations of world's largest economy we're talking about here. Pretty sure he wouldn't want to make it in the history books that way.

The US is still known to the outside world as the epicentre of the global banking crisis till today. To not raise the debt ceiling would mean a global calamity. To default would mean Obama will be the first US President (and I'm pretty certain he'll make sure that does not happen) and China! Let's not go there, they're the US' biggest creditor.

Whatever it is, market will be pretty anxious up till next week I guess. But to feed that anxiety, the FED minutes will be released this Thursday. Watch it, might do investors some good. That said, despite this being a US debt crisis, demand for their government bonds are still crazy high!