Dow went down 98, decliners barely ahead of advancers & NAZ was off 54. The MLP index added 1+ to the 217s & the REIT index was off 1+ to the 365s. Junk bond funds hardly budged & Treasuries had modest selling which increased yields (more below). Oil crawled up to 71 & gold fell 4 to 2015.
AMJ (Alerian MLP Index tracking fund)
Senate Majority Leader Chuck Schumer is directing his Dem caucus to share "sobering" projections on a potential debt default with their constituents in a bid to ratchet up pressure on Reps during tense negotiations on the federal borrowing limit. Schumer sent a letter to Senate colleagues, which was meant to be the 2nd time all 4 Congressional leaders sat down with Pres Biden to discuss the debt ceiling. But the meeting was called off yesterday, signaling that interim discussions between Congressional & White House staff have so far failed to make enough headway for a meaningful follow-up. "Earlier this week, I met with President Biden, Speaker McCarthy, Leader McConnell, and Leader Jeffries to discuss the pressing need to avoid the nation’s first ever-default. Our message to our Republican colleagues was plain and simple: Take Default Off the Table," Schumer wrote. He encouraged fellow senators to share with constituents a Dem-backed report that claims Reps' "threats to cause a default could trigger a massive recession that would cost 8.3 million Americans their jobs." "For a fulsome analysis of the fallout of default, I encourage you to read the updated Joint Economic Committee report and to share the sobering findings far and wide with your constituents in your state," Schumer wrote. Reps have for months insisted they will not agree to raising the debt limit on its own, but rather pair it with future spending cuts. But Dems have argued that a "clean" increase of the $31.4T debt is an obligation of the federal gov & called for spending talks to be held during the normal appropriations season at the end of the fiscal year. DC is on a time crunch in these negotiations; there's less than a week's worth of days when the pres, the Housed & Senate are all in town at once before the US is projected to potentially run out of cash to pay its obligations on or around Jun 1. But as of today, it appears that any newfound sense of urgency has not moved the needle for either side.
Schumer urges Dems to stoke fear as debt ceiling crisis looms large
The Federal Deposit Insurance Corp (FDIC) proposed a special assessment of the largest US banks to recover the funds used to protect uninsured depositors who otherwise would've been left holding the bag following the failures of Silicon Valley Bank (SVB) & Signature Bank. The proposed special assessment would recoup the $15.8B paid out from the FDIC's Deposit Insurance Fund to protect depositors in SVB & Signature who had deposits in excess of the $250K insurance threshold. It would do so by imposing a fee of 0.125%, or 125 basis points, on insured deposits at banks with $5B in assets or more, which would remain in effect for 8 quarterly assessment periods starting in Q1-2024. The FDIC estimates that about 113 banks will be subject to the fee & that banks with more than $50B in total assets will pay about 95% of the special assessment, while those with less than $5B will be exempt. "The proposal applies the special assessment to the types of banking organizations that benefited most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits," said FDIC Chair Martin Gruenberg. "The proposal also promotes maintenance of liquidity, which will allow institutions to continue to meet the credit needs of the U.S. economy." Under the Federal Deposit Insurance Act, the FDIC is required to impose an assessment fee on banks to recover funds paid out from the Deposit Insurance Fund whenever a systemic risk designation is invoked by regulators amid a banking crisis. The proposed assessment has to go thru the federal rulemaking process, which includes a 60-day public comment period after the proposal appears in the Federal Register. It Is also subject to revision before it is finalized if changes are made to the loss estimates, mergers or failures occur, or the reported estimates of uninsured deposits.
FDIC wants big lenders to shoulder Silicon Valley, Signature bank busts
Treasury yields were little changed as investors digested this week's inflation data and assessed what it could mean for the future of the economy & Federal Reserve monetary policy. The yield on the 10-year Treasury was flat at 3.392% & the yield on the 2-year Treasury was trading less than 1 basis point higher at 3.912%. Yields & prices have an inverted relationship & one basis point is equivalent to 0.01%. Investors assessed the outlook for the economy as multiple key inflation readings came in lower than expected this week. Yesterday, Apr's producer price index reflected a 0.2% increase of wholesale prices on a monthly basis, lower than the 0.3% rise expected. Earlier in the week, the consumer price index print for Apr had come in 0.1% less than anticipated at 4.9% on a year-over-year basis. It rose 0.4% from Mar, which was in line with expectations. The latest inflation figures are likely to inform upcoming monetary policy decisions from the Federal Reserve, which has been hiking rates in an effort to cool the economy since Mar 2022. Concerns about that leading the economy into a recession have grown louder in recent weeks. After its latest meeting, the Fed hinted that its rate hiking campaign may be paused soon, but Chair Jerome Powell noted that battle against inflation was not over & policy decisions remained data-dependent. Data today showed import prices climbed 0.4% in Apr, marking the first rise in 2023. Thed forecast was for a 0.2% rise last month.
Treasury yields hold steady as investors weigh economic, monetary policy outlook
It's one crisis after another & there is no leader to solve these problems. The bank bailout cost will be passed on to customers next year. Raising the debt ceiling will go to the last minute this month, if not later. High inflation dribbles on, even if it is at reduced levels. There is more talk of that looming recession. Then there is the southern border which is a monumental disaster. The outlook is very gloomy.Dow Jones Industrials
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