Updated March 23 at 6:25am

Financial conditions rise to record on debt talks

U.S. financial conditions climbed to the highest level on record amid speculation lawmakers will agree to a deal to raise the debt ceiling and avert a default.

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Financial conditions rise to record on debt talks


NEW YORK - U.S. financial conditions climbed to the highest level on record amid speculation lawmakers will agree to a deal to raise the debt ceiling and avert a default.

The Bloomberg U.S. Financial Conditions Index increased 0.13 to 1.54, the highest in records dating back to January 1994. The gauge measures stress in the markets by combining everything from money-market rates to yields on government and corporate bonds to volatility in equities. During the debt-ceiling debate of August 2011, the index fell as low as negative 1.631.

The measure has risen from last week’s one-month low of 1.16 as lawmakers meet a day before Treasury Secretary Jacob J. Lew said that the U.S. will breach its borrowing authority. House Speaker John Boehner will allow a vote on an emerging Senate accord to end the U.S. fiscal impasse and the agreement will pass, said Representative Kevin Brady of Texas, a senior House Republican.

“Everyone is basically assuming we’re going to get a vote on a deal sometime today, if not in the next few hours,” Mark McDonnell, a senior money manager at Hillswick Asset Management LLC in Stamford, Conn., which manages $1.3 billion, said in a telephone interview.

The Senate proposal would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7. House leaders haven’t decided whether they will vote on the Senate bill, said a House Republican aide who spoke on condition of anonymity.


One-month rates fell 9.6 basis points to 0.25 percent at 11:20 a.m. in New York after touching 0.45 percent, according to data compiled by Bloomberg. The benchmark 10-year yield was little changed at 2.72 percent, according to Bloomberg Bond Trader data.


The Standard & Poor’s 500 rose 1.3 percent to 1,720.20 at 11:22 a.m. in New York, almost climbing to its all-time high of 1725.52 reached on Sept. 18. The Dow Jones Industrial Average gained 195.8 points, or 1.3 percent, to 15,364.34.

Rate swaps

The U.S. two-year interest-rate swap spread, a measure of debt-market stress, rose 0.88 basis point to 13.13 basis points. The gauge typically narrows when investors favor assets such as corporate bonds and widens when they seek the perceived safety of government securities. The measure has dropped from this year’s high of 19.55 on June 21.

Default swaps

A gauge of U.S. company credit risk fell. The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, declined 2.5 basis points to a mid-price of 74.6 basis points, according to prices compiled by Bloomberg. The index, which typically rises as investor confidence deteriorates and falls as it improves, has averaged 81.7 this year.


The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, rose 0.1 percent to 1,013.78. The index has traded in a range of 1,007.9 and 1,038.63 in the past three months.


The CBOE Volatility Index, or VIX, plummeted 15.81 percent to 15.71, the lowest level since Oct. 1. Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE index fell to 75.81, compared with the average this year of 72.48. Currency swings as measured by the JPMorgan Global Volatility Index were unchanged at 8.34.

Energy, commodities

West Texas Intermediate crude oil for November delivery rose $0.83, or 0.82 percent, to $102.04 a barrel on the New York Mercantile Exchange.

Gold futures for December delivery fell 0.09 percent to $1,272 an ounce on the Comex in New York.

Copper futures for delivery in December rose 0.44 percent to $3.3320 a pound on the Comex in New York.


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