September 26, 2021

Rise and Shine For The Week Ahead (27 Sep)

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“Hot” On The Plate

The US debt ceiling has popped up on the discussion table, as the US Congress look to reach a deal to raise the federal borrowing limit before the government runs out of money by mid-October. In 2011, S&P reduced the credit rating of the US from triple A to double A, when the Congress came close to not extending the ceiling, which resulted in an increase in treasury borrowing costs of about $1.3b in the fiscal year. While the US House has passed a measure to keep the government funded till Dec and suspended its borrowing limit through 2022, the bill still need to be passed in the Senate. More on the US debt ceiling explained here: https://www.wsj.com/articles/us-debt-ceiling-explained-11632429692

The cryptocurrency market suffered another blow last week, after China tightened its stance again on cryptocurrencies. The central bank of China had deemed all cryptocurrency related activities as illegal. While China’s strong stance on the cryptocurrency has dampened the short term sentiments for the cryptocurrency market, the cryptocurrency market also has its fair share of supporters. If you are buying on the dip, here is something to consider. According to JP Morgan, big investors have begun pivoting out of bitcoin futures into Ethereum amid a “strong divergence in demand”. Read more here: https://www.forbes.com/sites/billybambrough/2021/09/26/jpmorgan-warns-big-investors-are-suddenly-dumping-bitcoin-for-ethereum-amid-a-150-billion-crypto-price-crash/?sh=2bc36744213f

Week Ahead

Looking ahead, this will be the end of 3Q which could be a volatile week, as investors closed out their books for the quarter. US Fed Chair and Treasury Secretary Janet Yellen will be speaking to Congress as investors also look to see if the US lawmakers will be able to pass a funding plan in time to avert a government shutdown.

China Evergrande’s debt problem will continue to hog the headlines. The Chinese government had over the last few days injected more cash into the financial system to boost liquidity and calm short term nerves. However, investors continue to be nervous after China Evergrande stayed silent on the interest payments on its US dollar bond which was due on last Thursday and due to mature in March 2022. While no payment has been made on last Thursday, China Evergrande will not technically default unless it fails to make payment within 30 days. For the rest of the year, Evergrande has interest payments due each month in October, November and December.

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