No panic in the financial markets so far on lack of a plan to raise U.S. debt ceiling

07/25/2011 12:27 pm EST


Jim Jubak

Founder and Editor,

The financial markets are not amused by the weekend’s Keystone Cops routine in Washington this weekend over raising the debt ceiling. But you can’t call this a rout or a panic by any definition.

U.S stocks are down—but by just 0.51% for the Standard & Poor’s 500. In Europe German stocks are up—the DAX Index has edged 0.2% higher—but the wider STOXX 50 Index is off 1.05% on a Moody’s Investors Service downgrade of Greek debt that is equivalent to a default rating. In Asia the always-volatile Shanghai Composite Index fell 2.96% over night—but is partly a reaction to the wreck of two high-speed trains in China that has reopened the controversy over corruption in the building of the country’s high-speed rail network. The less volatile Hong Kong Hang Seng Index was down 0.68%.

Of course, if there were going to be a financial market rout, you’d expect it to show up first in the bond and gold markets. Remarkably U.S. Treasuries are just about flat as of 11:15 a.m. New York time. The 2-year Treasury note is down just 0.03% to yield 0.39%. (Not exactly the kind of ultra-high yield you’d expect in a panic.) The 10-year Treasury is down 0.19% to yield 2.98% and the 30-year is down 0.69% to yield 4.29%

That isn’t to say there’s no fear in this market. Gold (futures for August delivery) is up to a new all time high of $1615.70 an ounce as of 10:40 a.m. in New York.

The big test will come later this week when the Treasury auctions $99 billion in notes--$35 billion each of two and five-year notes, and $29 billion in seven-year notes. Watch demand to see how many investors are buying as well as price.

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