Good ideas and conversation. No ads, no tracking. Login or Take a Tour!
- Against this backdrop, the relative calm that pervades markets seems puzzling to us. Volatility in equity, rates and credit markets appears relatively contained and well below March levels. Looking back to 2011, markets were also fairly calm before the X-date but subsequently registered sharp moves. In the three weeks after the resolution, the S&P 500 fell by over 12%, 10-year Treasury yields declined by 70bp and high yield bond index spreads widened by more than 160bp. In our view, these changes resulted in part from the fiscal contraction embedded in the agreement that resolved the 2011 debt ceiling impasse. We don’t know yet what the current resolution will entail and would caution against expecting a similar market reaction this time, especially in Treasury yields.