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Monday, August 1, 2011

Live Blog: The U.S. Debt Battle july 28, 2011

  • Gold is trading slightly higher amid continuing demand for safe-haven investments ahead of the the Aug. 2 deadline for raising the U.S. debt ceiling. Spot gold is at $1,615.20 a troy ounce, up $1.10 from its previous close in New York. Prices are well supported amid fears that the U.S. could default on its debts in less than a week's time and will likely lose its AAA credit rating.
    "A downgrading of the U.S. is inevitable given its very poor fiscal position. The question is by how much the U.S. is downgraded and AA looks possible in the coming months," GoldCore said in a report.
    This downgrade would make asset diversification into gold "more important than ever" the house said, leading to higher demand and further gains for the yellow metal.
    Gold posted a new record at $1,628.64 an ounce Wednesday due to the default fears in the U.S and the lingering concerns over the euro-zone debt crisis.
  • The Sensex is down 0.7% at 18,295.71, tracking weak Asian peers amid concerns over the U.S. sovereign debt crisis. A local analyst says global cues are the biggest worry, but there could be some buying later as it's the day the July series of stock futures and options expires.
  • The Hang Seng Index is down 1.0% at 22,308.44 at midday, weighed by U.S. stock weakness on concerns over the continuing U.S. debt ceiling standoff.
    • 1:08 am
    • ANZ Expects Australia Rate Hike Next Week
    • by Geoffrey Rogow
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    Australia's central bank will hike interest rates 25 basis points when it meets next week, Australia & New Zealand Banking Group said Thursday.
    The forecast from ANZ comes a day after Australia's second-quarter inflation report came in slightly above expectations.
    "Some members of the (Reserve Bank of Australia) board may not want to hike in August. But with the RBA's persistent focus on inflation, and the forward-looking nature of monetary policy, a small move now will likely be the RBA's preferred action," said ANZ Chief Economist Warren Hogan in a note to clients.
    An increase in rates from the RBA would mark the first change in policy since November, when it raised the policy rate by 25 basis points to the current 4.75% level, marking its seventh hike in 13 meetings.
    The most likely factor that could keep the bank on hold in August, is "a significant deterioration in the U.S. debt situation," ANZ said. Notably, the RBA is meeting on Aug. 2, the same day the U.S. debt ceiling is expected to be reached.
    • 1:13 am
    • Asian Shares Continue Slide
    • by John Phillips and Puja Rajeev
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    Asian stock markets continue to lose ground in afternoon trading Thursday as the U.S. debt ceiling impasse dampened market sentiment. Japan's Nikkei Stock Average fell 1.7%, Australia's S&P/ASX 200 slid 1.6%, South Korea's Kospi Composite lost 1%, China's Shanghai Composite Index fell 0.9%, Hong Kong's Hang Seng Index was down 1% and India's Sensex was off 1.2%.
    • 2:16 am
    • China's Xinhua Criticizes U.S. 'Debt Addiction'
    • by Aaron Back
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    A commentary by China's state-run Xinhua News Agency on Thursday criticized U.S. leaders for putting the world economy in jeopardy in their wrangling over the debt limit, calling on them to show "some sense of global responsibility."
    The sharply worded commentary by Xinhua indicates rising alarm in China over the prospect of a U.S. default. "The ugliest part of the saga is that the well-being of many other countries is also in the impact zone" if Republicans and Democrats fail to come to an agreement, Xinhua said.
    "With leadership comes responsibility. It is unfortunate and disappointing that when political leaders in Washington spar over who is doing good for their country, they take little account of the world's economic soundness."
    The Xinhua commentary also criticized a "debt addiction"  in the U.S.
    • 3:04 am
    • Taiwan: 'Fundamentally' Confident in U.S.
    • by Aries Poon, Paul Mozur, Jason Dean and Almar Latour
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    Taiwan President Ma Ying-jeou, in a wide-ranging interview with the Journal on Thursday, voiced concerns that debt problems in the U.S. and Europe could slow global economic growth in the second half of this year, potentially affecting Taiwan's export-reliant economy.
    • 4:11 am
    • European Stocks Sharply Lower on U.S. Debt Worries
    • by Andrea Tryphonides
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    European stocks opened sharply lower as U.S. debt negotiations failed to make any meaningful progress.
    The Dow's heavy losses on Wednesday weighed on sentiment, as did fresh worries over euro-zone sovereign debt after S&P downgraded Greece's long-term sovereign credit rating to double-C from triple-C.
    • 4:59 am
    • More from Xinhua: China Still Has to Keep Buying Treasurys
    • by Aaron Back and Stefanie Qi
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    Alongside a hard-hitting commentary criticizing U.S. leaders for failing to consider the fallout in the rest of the world from a U.S. debt default, China's state-run Xinhua News Agency also ran a separate news piece saying China has little choice but to continue buying U.S. Treasurys.
    Xinhua said a U.S. default would cause the dollar to plunge, resulting in surging commodity prices, which could create imported inflation pressures in China.
    Even if a default is avoided, a downgrade of the U.S. credit rating could hurt confidence in Treasurys and may prompt China to reduce its future purchases of the instruments. Still, Xinhua said U.S. Treasury securities remain the safest bonds in the world, and only the U.S. Treasury market is large enough to absorb China's rapidly growing foreign exchange reserves.
    Analysts say that other sovereign debt markets are not large or liquid enough to serve as a destination for a large portion of China's reserves, worth nearly $3.2 trillion at the end of June.
    Read more.
    • 5:05 am
    • 10-Year UK Gilt Yield Falls Below 10-Year Treasury Yield
    • by Neelabh Chaturvedi
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    The yield on 10-year U.K. gilts dropped below the yield on 10-year U.S. Treasurys Thursday for the first time in nearly two years, as financial markets continue to fret about the unresolved U.S. debt ceiling debate.
    The 10-year gilt was recently yielding 2.967% and the 10-year Treasury was yielding 2.974%. The last time 10-year gilt yields were below 10-year Treasury yields was in August 2009.
    With only a handful of liquid triple-A assets available, investors have been flocking into gilts. While the U.K. still has one of the highest budget deficits in the European Union, what differentiates it from the U.S. is the political resolve shown by the government to belt-tightening.
    Since coming to power last year, the U.K. government has announced a slew of measures to curtail the deficit. The government has planned a £113 billion fiscal tightening between 2010 and 2015, including £83 billion in spending cuts.
    While the economic recovery appears to be wavering, Chancellor of the Exchequer George Osborne this week reiterated his commitment to his austerity plan.
    "The U.K. hasn't been totally repriced over the past 15 months because the deficit has collapsed," Royal Bank of Scotland strategist Andy Chaytor said in a note.
    "It has been repriced because of the evident and absolute political commitment to get the deficit down which, when compared with peers in the likes of the U.S. or France, leaves the U.K. as a very obvious relative safe haven," Mr. Chaytor said.
    • 5:17 am
    • SocGen Says Markets Nonplussed by Debt Ceiling
    • by Siva Sithraputhran
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    The failure of U.S. lawmakers to reach a deal is undermining the dollar, but only very slowly, says Societe General. As there is no agreement yet, market participants are increasingly focusing on the practical implications of failure to reach a deal by Aug. 2, it says.
    "The conclusion is that date is not a 'drop dead date', that the chances of the U.S. losing its triple-A rating are pretty high, but also, 'so what?'," SocGen says.
    "The Treasury market is not overly bothered... We are a long way from the kind of risk aversion that would derail the flow of money eastwards," it says.
    The euro recently traded at $1.4356, from at $1.4363 in late New York Wednesday, while the dollar traded at ¥77.68 from ¥77.98.
    • 5:59 am
    • U.S. CDS Spread Edges Wider
    • by Serena Ruffoni
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    The spread on credit-default swap on the U.S. continues to rise as the debt ceiling impasse remains unresolved, Markit says.
    Markit notes the five-year spread is 0.01 percentage points wider at 0.63 percentage points, while the one-year CDS spread is 0.01 percentage points wider than yesterday's close at 0.80 percentage points.
    The underlying notional amount on U.S. CDS contracts are valued at $4.9 billion, according to DTCC, a relatively small figure that is close to the value of Greek CDS contracts. Liquidity is also very low, especially on the one-year contract, largely owing to the fact that the Treasurys have traditionally been considered a nearly risk-free investment.
    • 8:25 am
    • Contractors Assess Default
    • by Nathan Hodge
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    U.S. defense firms and government contractors are starting to prepare for the unthinkable: The possibility that the U.S. government, the ultimate reliable customer, may not be able to pay its bills on time.
    Some companies are reviewing their balance sheets to calculate how long that can get through any delay in payments. Others are scrutinizing contracts to determine what work they must perform if the government runs out of cash.
    Read the full story.
  • What will it take to reach a deal? Check out this graphic, which compares details from proposed plans.
  • As the deadline approaches for the first-ever U.S. debt default, new compromise ideas are few and finger-pointing is prevalent. Which side is to to blame for the stalemate preventing a deal? Cast your vote.
    • 8:47 am
    • Cost to Insure Treasurys at a High
    • by Katy Burne
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    The cost to insure U.S. sovereign bonds against non payment soared to a fresh record Wednesday as the debt-ceiling standoff in Washington continued and the government moved closer to a debt default.
    The price of one-year protection sold in the form of derivatives called credit-default swaps, or CDS, is now above the cost of five-year protection—a sign that confidence in the government reaching a last-minute agreement is waning.
    Read the full story.
    • 8:55 am
    • In Debt-Ceiling Chicken, Markets Are Betting the Wrong Bird
    • by David Weidner
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    Columnist David Weidner says in his column today that we are getting two very different messages about what missing the debt-ceiling deadline might really mean.
    • 9:05 am
    • What About U.S. Companies’ Ratings?
    • by David Wessel
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    Real Time Economics answers a reader's question about the impact of a downgrade of the U.S. Treasury debt by Standard & Poor’s: If the U.S. loses its AAA rating, will U.S. companies automatically be downgraded too?
    Read the full post.
    • 9:14 am
    • Should Washington Teach Financial Literacy?
    • by John D. McKinnon
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    Sen. Tom Coburn (R., Okla.) probably has suggested more ways to cut spending and close deficits than anyone else in Congress - $9 trillion worth so far, according to an exhaustively researched fact book that his office recently prepared.
    On Wednesday afternoon, as the debt drama’s final act began to unfold in Congress, the Oklahoma Republican took to the Senate floor to make the case for including a few of his ideas in the final plan. He expressed concern that lawmakers aren't listening to what voters want, and aren’t doing enough to address the issue.
    "We don't hear the real solutions to our problems,” he said. Voters have “got a good reason to be anxious about us."
    Among the more basic items on Sen. Coburn’s list: Cutting $150 billion to $200 billion over the next decade simply by eliminating redundant programs. He noted there are more than 100 federal programs on surface transportation, 82 for teacher improvement and training, 180 for economic development -- and 56 federal programs to promote financial literacy.
    "How do we," Mr. Coburn asked, "have any authority to teach anybody about financial literacy?"
    (Photo: Mr. Coburn and Sen. Richard Burr, R-N.C., on Tuesday by The Associated Press)

    • 9:26 am
    • Gilts Yield Less Than Treasurys
    • by Mark Gongloff
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    U.K. gilts are yielding less than U.S. Treasurys.
    Ten-year gilts just a few moments ago yielded 2.94%, compared with 2.95% for U.S. Treasurys. They’ve been below Treasurys for most of the morning. But that's no cause for panic, says Mark Gongloff on MarketBeat.

    • 9:39 am
    • Boehner Sets House Vote
    • by Joseph B. White
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    Today should be a pivotal day in the scramble to avoid a federal default. House leaders this morning scheduled a vote between 5-6 p.m. tonight on the latest plan from House Speaker John Boehner (R., Ohio) to lift the federal debt ceiling in two stages, starting with a $900 billion increase accompanied by $917 billion in cuts.
    Mr. Boehner appears to have quelled a rebellion on his right that threatened to derail his plan, which is likely doomed in the Democratic-controlled Senate. President Barack Obama also has threatened to veto the plan because it would force a rerun of the debt ceiling fight in six months.
    But Mr. Boehner’s timetable means House members will avoid a repeat of the stomach-churning scene during the first vote on the TARP bank-bailout bill in 2008: At that time, markets nosedived when it became clear that the bailout proposal was going down.
    This time, if Mr. Boehner keeps to his schedule, the U.S. debt and stock markets will be closed, as will major Asian markets. Stay tuned.

    • 10:16 am
    • The Road to a Downgrade
    • by WSJ Review & Outlook
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    WSJ's opinion piece on the history of the entitlement state.

    • 10:33 am
    • U.S. Stocks Rise on Jobless Claims
    • by Brendan Conway
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    The debt-ceiling debate has weighed heavily on investor sentiment this week, but U.S. stocks rose this morning after government data pointed to an improvement in the troubled labor market.
    Attention is focused on efforts in the House and Senate to push separate plans to a vote. Read the markets story.

    • 10:40 am
    • Wall Street Weighs in on Debt Debate
    • by Victoria McGrane
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    Wall Street has been working behind the scenes, urging lawmakers to resolve the debt-ceiling debate. Now they’re going public.
    More than a dozen top executives at the nation’s largest financial-services firms sent a letter to Capitol Hill and the White House early this morning urging lawmakers and the president to reach a deal on the deficit this week.
    “Our economic recovery remains very fragile. A default on our Nation’s obligations, or a downgrade of America’s credit rating, would be a tremendous blow to business and investor confidence – raising interest rates for everyone who borrows, undermining the value of the dollar, and roiling stock and bond markets – and, therefore, dramatically worsening our Nation’s already difficult economic circumstances,” reads the letter, signed by Bank of America Corp. CEO Brian Moynihan, Citigroup Inc. CEO Vikram Pandit, Goldman Sachs Chairman and CEO Lloyd Blankfein and J.P. Morgan Chase & Co. CEO James Dimon, among others.
    “Given this very real risk, policymakers must correct our fiscal course now, inspire market confidence by paying all of our bills on time, and demonstrate that America is a democracy capable of putting differences aside to solve our most challenging problems,”continues the letter, a copy of which was viewed by The Wall Street Journal.
    The executives are all members of the Financial Services Forum, a trade association comprising the CEOs of the 20 largest financial services firms doing business in the United States. The group’s president, Rob Nichols, also signed the letter.

    • 10:51 am
    • Warner Doubtful on New Debt Panel
    • by Katie Glueck
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    Sen. Mark Warner (D., Va.), a member of the bipartisan “Gang of Six” senators that started working on a deficit-reduction deal months ago, expressed doubt Thursday morning about the efficacy of new deficit commissions included in the debt ceiling plans from House Speaker John Boehner (R., Ohio) and Senate Majority Leader Harry Reid (D., Nev.).
    Speaking at a breakfast hosted by Politico, Mr. Warner stressed that members of his Gang of Six, who have been engaged in talks for months, have worked hard to build trusting relationships. That’s a dynamic that could be hard to replicate in any new commission, he said.
    “We didn’t build this trust overnight,” he said.
    Mr. Warner said that after a deal to raise the debt ceiling is approved, a deficit plan hammered out by the Gang of Six should be put to a vote, even if other commissions are established.
    At the breakfast, Mr. Warner described the Gang of Six's negotiation process, which ranged from talks over grilled steaks at Mr. Warner’s home to long hours in Senate conference rooms.
    “We’ve spent a lot of time together,” Mr. Warner said. “We got mad at each other a lot.”
    (Photo: Mark Warner, by Getty Images)

    • 10:58 am
    • Defense Contractors Wary of U.S. Default
    • by Nathan Hodge
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    In this video, WSJ's Nathan Hodge outlines fears shared by defense contractors over a potential U.S. default. Contractors, some of whom see as much as 85% of revenues come from U.S. contracts, could see cash flow interrupted.

    • 11:06 am
    • Lyndon Johnson Would Be Proud
    • by Andrew Ackerman
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    Old-school party discipline suddenly appears to be back in style on Capitol Hill.
    Today, House Democratic leaders said they expected few, if any, members of their caucus would break rank and vote for House Speaker John Boehner’s plan to cut spending and raise the federal debt ceiling in two stages.
    Rep. Steny Hoyer (D., Md.), the Democratic whip, said in speaking to reporters following a Democratic caucus meeting that his party is "pretty close" to unanimously opposing the plan.
    Rep. John Larson (D., Conn.), chairman of the House Democratic caucus, told reporters that no one from his party will support the plan, though he cautioned not every member attended the caucus meeting. None of the 25 fiscally conservative Blue Dog Democrats will support the plan, he said.
    The wild cards in the Democratic calculations are the five Democrats who supported a more conservative "Cut, Cap and Balance" plan last week. It’s not clear whether any of them would vote in favor of Mr. Boehner's plan.
    The demonstration of discipline by Democratic leaders comes a day after Mr. Boehner (R., Ohio) confronted conservative rebels in his fractious caucus who had threatened to oppose his latest debt plan, telling them to “get your a— in line” or risk handing a victory to President Barack Obama and the Democrats.
    As of this morning, Republican leaders showed more confidence that they had corralled their dissidents by scheduling a vote on the Boehner plan for this evening.

    • 11:11 am
    • House Leaders Breathing Easier
    • by Gerald F. Seib
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    House Republicans are starting to breathe easier, thinking that House Speaker John Boehner and his lieutenants have lined up the votes needed to pass his plan to cut the deficit and raise the debt ceiling.
    The vote, scheduled for 6 p.m. Thursday, figures to be a cliff-hanger, and Mr. Boehner is still working to lock down the 217 votes he needs to get it passed, with few or no votes coming from Democrats. But his allies are feeling better about the vote count than they did yesterday.
    “There is a belief now that this can be a win that shows results and we can build on,” said one Republican aide.
    The action will move quickly to the Senate, though, which is likely to pass a different plan, in which case Mr. Boehner will have to round up the votes again for a compromise.
    (Photo: Mr. Boehner by Getty Images)

    • 11:22 am
    • Crossroads GPS Backs Boehner Bill
    • by Danny Yadron
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    Crossroads GPS, a powerful conservative outside group, threw its weight Thursday behind House Speaker John Boehner’s proposal to raise the debt ceiling, looking to counter calls from other conservative groups that have urged lawmakers to vote “no.”
    The group has more ties to the establishment wing of the Republican Party than the anti-big-government tea party groups that have attacked the plan. Still, it’s a sign that many Republicans now want the rest of their party to coalesce around Mr. Boehner’s proposal. Pro-Boehner Republicans argue that the GOP could face a huge blowback if it prevents Congress from raising the debt ceiling by Tuesday.
    “Kudos to Speaker Boehner for showing President Obama what leadership is really about,” Steven Law, president and CEO of Crossroads, said in a written statement.
    The conservative Club for Growth, by contrast, has called on lawmakers to vote against the Boehner plan, and warned that the vote will be counted in its annual Congressional Scorecard.
    The House is scheduled to vote on the Boehner plan around 6 p.m. Thursday.

    • 11:33 am
    • More Balanced Budget Votes?
    • by Naftali Bendavid
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    House Speaker John Boehner (R., Ohio,) has signaled he will give conservatives in his caucus not one but two more chances to vote for a constitutional amendment to balance the federal budget. One proposal is expected to be a straightforward requirement to match income and outgo. A second could amplify that by requiring super-majorities to approve tax increases and raise the debt limit.
    Neither proposal appears to have a future as long as Democrats control the Senate and the White House. But offering Republican House members the opportunity to record votes for the proposals appears to be one relatively small price for Mr. Boehner to pay to shore up his right flank.

  • White House spokesman Jay Carney is urging Congress to dispense with House Speaker John Boehner’s debt ceiling bill and move on to something new.
    “It ain't going anywhere," Mr. Carney said, referring to Mr. Boehner’s proposal.  The White House has made it clear all week that it will not accept a plan that delivers only a short term increase in the federal borrowing cap – which is exactly what the House GOP bill offers.
    Senate Democratic leaders have said Mr. Boehner’s bill is dead on arrival in their chamber. Whether Senate Majority Leader Harry Reid can get 60 votes to move forward with his rival plan to cut $2.7 trillion in spending over 10 years and lift the debt ceiling through the end of 2012 is equally unclear.

  • Standard & Poor’s is hosting a Webcast at 1 p.m. Eastern time that primarily focuses on public finance, such as state and municipal debt. However, the webcast will have a preface that touches on the overall U.S. outlook. S&P is currently reviewing the country’s sovereign rating for a possible downgrade. At 1 p.m., click here to watch

    • 12:06 pm
    • Wake Up the Echoes
    • by Michael R. Crittenden
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    It’s doesn’t have the same ring as “win one for the Gipper” but House GOP leaders are hoping “buckle your chinstrap and knock the sh-- out of ‘em” is rousing enough to help win a close vote on their debt ceiling package later Thursday.
    At a House Republican caucus meeting Thursday morning, Rep. Mike Kelly (R., Pa.) gave a pep talk as Republican leaders worked to rally support for House Speaker John Boehner’s (R., Ohio) proposal to cut spending and raise the debt limit.
    Kelly, who attended the University of Notre Dame on a football scholarship, received a raucous response when he exhorted rank-and-file Republicans, Rep. Pete King (R., N.Y.) told reporters after the meeting.
    “He gave a Knute Rockne-type speech,” Mr. King said while holding up a “Play Like a Champion Today” sign, a nod to the famed sign between the home locker room and tunnel to the field at Notre Dame Stadium that players touch before games. Mr. King said Mr. Kelly closed the pep talk by saying: “Put on your helmet, buckle your chinstrap, and knock the sh-- out of ‘em.”
    Some Republicans who were on the fence about supporting Boehner’s measure appeared to be leaning toward offering their support, and a number of members leaving the meeting said the package was gaining momentum.
    "I think you've seen some of the concerns about the original version answered and addressed [through]  changes in the bill. I think people, as we get closer to this, are understanding this is the alternative we have right now and have to move it forward,” Rep. Dave Camp (R., Mich.), who chairs the House Ways and Means Committee, said after the meeting.

    • 12:44 pm
    • Debt Snag Delays Forrester's IT-Spending View
    • by Matthew Jarzemsky
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    Forrester pulled an IT-spending growth forecast it was ready to publish Tuesday because of uncertainty around the U.S. debt ceiling stalemate, says Andrew Bartels, an analyst for the market research firm.
    Forrester had seen 7.4% 2011 IT spending growth in the U.S. If the U.S. defaults, Mr. Bartels sees 5.5% growth this year. He sees 6.5% to 7% growth if a deal is reached along the lines of House Speaker Boehner's or Senate Majority Leader Reid's proposal.

  • Standard & Poor’s is hosting a Webcast at 1 p.m. Eastern time that primarily focuses on public finance, such as state and municipal debt. However, the webcast will have a preface that touches on the overall U.S. outlook. S&P is currently reviewing the country’s sovereign rating for a possible downgrade. Click here to watch

  • The number of votes House Speaker John Boehner (R., Ohio) needs for a majority of the House to approve his debt plan tonight drops by one to 216 because of the absence of two Democratic lawmakers, which in turn means Boehner can afford to lose the support of 24 Republicans rather than 23.
    Rep. Maurice Hinchey (D., N.Y.) is recovering from colon-cancer surgery and is not present for the vote, joining Rep. Gabrielle Giffords (D., Ariz.), who is recuperating from the January shooting.
    Because two Democrats are absent from the 435-person legislative body, and there are two vacant seats, Boehner now needs 216 rather than 217 votes for passage of his bill.
    The two absences make it slightly more likely Republicans will round up enough support for what is widely expected to be a razor-thin vote.
    As of Wednesday night, at least 18 GOP lawmakers had publicly declared their opposition to the speaker's plan.
    Were only Giffords out, Boehner would still need 217 votes. There are 240 House GOP members.
    Hinchey's office announced July 12 that he will be out for two to three weeks to recover from surgery.

    • 1:52 pm
    • Reid: Senate Would Vote Down House Bill Tonight
    • by Kristina Peterson
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    Senate Majority Leader Harry Reid (D., Nev.)  said the Senate will vote tonight to block a Republican-backed bill to raise the debt ceiling, if it passes the House this evening.
    Sen. Reid said the Senate would move immediately to stop the bill, if it passes a vote in the House tonight.
    "As soon as the House completes its vote, the Senate will move to take up that bill, and it will be defeated tonight," Sen. Reid said in a statement this aternoon. Senate Democrats would only need a majority, or 51 votes, to prevent the bill from advancing. All 51 Democratic senators and the two independents have already said they would not support the measure.
    The proposal backed by House Speaker John Boehner (R., Ohio) would raise the debt ceiling in two steps before the end of 2012, with the first increase paired with a plan to lower the deficit by $917 billion over 10 years. The second step would require additional deficit reductions and another debate over the debt ceiling, but Democrats have objected to having to return to a fight over the debt ceiling again before elections at the end of 2012.
    "No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now," Sen. Reid said.
    Treasury officials have said Congress must act to raise the $14.29 trillion borrowing limit by Aug. 2 to prevent the country from defaulting on its debt.

    • 2:25 pm
    • House Leaders Clear Preliminary Debt Vote, Set Stage for Vote Later Today
    • by Siobhan Hughes
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    House Speaker John Boehner’s plan to avoid a federal debt default has cleared a test vote this afternoon, a positive sign for the Ohio Republican’s push to win the final vote scheduled for later today. The House voted 238-186 along party lines to move ahead with debate on Mr. Boehner’s proposal to lift the federal debt ceiling and cut spending in two stages, starting with a $900 billion increase in the debt limit and cuts of about $917 billion over 10 years.
    It’s still not completely clear that Mr. Boehner and his lieutenants have crushed the tea party revolt that has threatened their strategy all week. Some Republicans who said they still oppose the debt plan itself voted in favor of proceeding with debate.

    • 2:54 pm
    • Emerging-Market Borrowers Seize on Debt Discord
    • by Erin McCarthy
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    Emerging-market sovereign and corporate borrowers are taking advantage of the debt crises in the euro zone and the U.S. to deliver a stream of new bonds into the hands of investors.
    Interest is high as investors see few places to hide out in current turbulent markets. In Italy, a lackluster government bond auction on Thursday highlighted worries about Western Europe's debt markets. Meanwhile, the U.S. risks losing its triple-A credit rating as government leaders continue to bicker over deficit reduction only days before an Aug. 2 deadline to raise the debt ceiling.
    "Where would you rather have your money?" asked Edwin Gutierrez, portfolio manager at Aberdeen Asset Management. "Do you really want to be in the lion's den, or the bear's lair of Europe?"
    In July alone, emerging Asian countries and corporations issued $40 billion in new debt via investment bank syndicates, bringing the year-to-date total to about $413 billion, compared to $341 billion the same period last year, according to data provider Dealogic. Latin America issued about $9 billion in new debt so far this month, bringing the year-to-date total to $82.2 billion, compared to $68.2 billion for the same period last year.
    The steady flow of new bond offerings over the past month and the strong investor interest that spawned it suggest that financial flows into emerging markets are continuing, putting even more upward pressure on their ascending currencies.
    The strong issuance is expected to persist as investors are hungry for more. Last week, tiny Sri Lanka's newly issued $1 billion 10-year global bond was 7.5 times oversubscribed. The Dominican Republic's reopening of its 2021 bond was also heavily oversubscribed and priced at a yield of 6.95%, the lowest yield for an international bond from the Dominican Republic. Demand for these bonds is so high that large investors are often unable to buy as much of the offering as hoped.
    Aberdeen’s Mr. Gutierrez said his firm was allocated a significantly smaller portion of the Sri Lankan and the Dominican Republican deals than it had requested. Broker-dealer MF Global's allocation for the Dominican Republic deal was scaled back by nearly 90% of its requested amount, said Michael Roche, a strategist with the firm.

    • 3:01 pm
    • Another Fed Officials Says Central Bank Can’t Help Congress
    • by Jon Hilsenrath
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    Federal Reserve officials are going out of their way to warn lawmakers and the White House that the nation’s central bank — which has printed money to boost the general economy — is in no position to do that to help the government if it needs cash.
    Here is what San Francisco Fed President John Williams says on the subject in a speech in Utah:
    "I need to stress, even as the nation must come to terms with its fiscal problems, a federal default must be avoided. Make no mistake — the Federal Reserve doesn’t have a magic wand that will allow the economy to get through a crisis of this magnitude unscathed."
    Read the full post at Real Time Economics

    • 3:15 pm
    • Liberals Seek a Hearing Outside the Capitol
    • by Katie Glueck
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    Some of the most liberal members of the House of Representatives escaped today’s debate over the federal debt ceiling to rally outside the Capitol against Republican plans to cut federal spending.
    The event, sponsored by a coalition of progressive groups including Moveon.org, drew about 300 people, organizers estimated. Attendees were joined by Reps. Keith Ellison (D., Minn.), Raul Grijalva (D., Ariz.), Jan Schakowsky (D., Ill.), Donna Edwards (D., Md.), Barbara Lee (D., Calif.), Sheila Jackson Lee (D., Texas), John Garamendi (D., Calif.) and Jerry Nadler (D., NY). Van Jones, President Barack Obama’s onetime green jobs adviser, was a host of the event.
    The rally attracted members of groups ranging from Planned Parenthood to Code Pink to a large coalition from the American Federation of State, County and Municipal Employees.
    Liberal Democrats, of course, don’t get much attention in a House dominated by Republicans, whose leaders are far more concerned about rebellion on their right than they are with wooing votes from the left.
    Amidst cheers and a few cries of “tax the rich!” from the crowd, the members of Congress railed against House Speaker John Boehner (R., Ohio) and his party’s proposals to raise the debt ceiling and roll back federal spending, especially criticizing initiatives to rein in expenditures for Social Security, Medicare and Medicaid.
    “We will not stand by while they try to balance the budget on the backs of the most vulnerable, low income poor and our seniors,” Ms. Lee said. “We will not stand by while they attempt to shred our nation’s safety net.”

    • 3:21 pm
    • S&P Bluffing on U.S. Downgrade?
    • by Mark Gongloff
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    Here’s a little good news, maybe, depending on how much credit you give Morgan Stanley on such things: Morgan Stanley economist David Greenlaw doubts the rating agencies have the guts to downgrade the US.
    In a Bloomberg TV interview with Mags Brennan, Mr. Greenlaw said he thought a downgrade would be avoided, because he thinks politicians will do just enough to enable the rating agencies to spare the US without losing face.
    “We think they’re unlikely to follow through on the threat of a downgrade, as long as [politicians] give them something they can hang their hat on,” he said. Such a hat-rack could include a new deficit-fighting commission (a feature of House Speaker Boehner’s plan) and/or a plan to get to the $4 trillion in deficit reduction S&P says it wants.
    Read the full post at MarketBeat

    • 3:25 pm
    • Moody’s Warns It Could Downgrade Local Governments
    • by Sara Murray
    • Add a Comment
    Moody’s Investors Service says it is considering a downgrade to 162 local governments, in a sign of how the effects of Washington’s debt-ceiling fight could ripple into the real economy.
    All three ratings agencies have warned the U.S. is at risk of losing its AAA rating if it fails to raise the debt ceiling (and Standard & Poor's has said it may downgrade U.S. debt anyway). Moody’s has taken it a step further warning that states and localities with triple-A ratings could also be subject to downgrade.
    Earlier this month Moody’s warned five states would risk losing their triple-A ratings in the event of a U.S. downgrade. Its additional warning Thursday included a total of 177 public finance credits ranging from local governments to a university and covering $69 billion in debt.
    Most of those credits, 162, were local governments scattered across 31 states. They accounted for $63 billion in debt and the heaviest concentrations were in Virginia and Massachusetts.
    The warning also included possible downgrades for 14 housing finance programs and one university: University of Washington. “This action primarily reflects UW's unusually large share of revenues derived from federal research grants and Medicare and Medicaid reimbursements,” according to Moody’s statement.
    The ratings agency reaffirmed its announcement earlier this month that the Smithsonian Institution’s debt is also at risk, but noted that the museum and research complex wouldn’t be automatically downgraded in the U.S. government’s rating changes.

    • 3:28 pm
    • Religious, Civic Leaders Arrested in Capitol
    • by Siobhan Hughes
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    A group of religious and civic leaders said they were arrested on Thursday at the U.S. Capitol for protesting a debt deal being developed in Congress that they fear would hurt the country's most vulnerable people.
    Common Cause President Bob Edgar and ministers were among at least 10 people who said they were arrested after praying inside the U.S. Capitol for the White House and Congress to spare in the poor in their efforts to rein in the country's debt.
    "Our elected officials are protecting corporations and wealthy individuals while shredding the safety net for millions of the most vulnerable people in our nation and abroad," Rev. Michael Livingston, Past President, National Council of the Churches of Christ (USA), who was among those arrested, said in a statement. "Our faith won't allow us to passively watch this travesty unfold. We've written letters, talked with and prayed for our elected officials, and prayed together daily in interreligious community. Today, we 'offer our bodies as a living sacrifice' to say to congress 'Raise revenue, protect the vulnerable and those living in poverty.'"

    • 3:55 pm
    • For World's Central Banks, a 'Catch 22'
    • by Michael Casey
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    Foreign central banks with trillions of dollars in foreign-exchange reserves tied up in U.S. government bonds are likely looking with horror at the wrangling in Washington. But they are extremely unlikely to dump their holdings in a hurry, and for that they can blame a Catch-22 dilemma known as the “dollar trap.”
    Here’s how it works: If these investors start to sell Treasurys or even make their intent to do so known, the dollar will fall. Therefore, their own currencies will rise. And since many of them are committed to keeping their currencies weak to protect their exporters’ interests, they will be compelled to intervene and buy dollars. And what are they supposed to do with those freshly purchased dollars? They must buy Treasurys, of course.  It’s the only market big, deep  and liquid enough to permit them to adjust their huge  portfolios without distorting prices to their disadvantage. Thus, the  journey brings them back where they started, minus a few hundred million dollars in transaction fees to U.S. banks.
    China, Japan, South Korea and others  might wish they’d never committed their national patrimony into the hands of people like John Boehner and Harry Reid. But there’ s precious little they can do about it now.

    • 4:09 pm
    • Aflac CFO: ‘Stupid Debt Deal’ Holding up Buybacks
    • by Matthew Quinn
    • Add a Comment
    Add Aflac to the list of companies squawking about the debt ceiling debacle unfolding in Washington. When asked by analysts and investors what was holding the company’s share repurchase program back, Aflac’s CFO wasn’t shy:
    “We gotta get the stupid debt deal done in the U.S., for one thing,” Kriss Cloninger said Thursday on a conference call, according to Bloomberg. “Who knows how that’s going to affect world markets?”
    Read the full post at CFO Journal

    • 4:19 pm
    • Bachmann to Boehner: Get Serious
    • by Danny Yadron
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    Tea party favorite and Republican Presidential Candidate Rep. Michele Bachmann sent a message to House Speaker John Boehner today: No, she won’t get in line.
    Hours before the House is scheduled to vote on a proposal to raise the debt ceiling, Ms. Bachmann suggested Mr. Boehner’s proposal to cut federal spending and raise the federal debt limit is not “serious.”
    “We have to have a fundamental restructuring of how we spend money,” Ms. Bachmann said. “Unfortunately, with the plan that’s being offered later this afternoon, we’re not making that fundamental restructuring.”
    Ms. Bachmann (R., Minn.,) has long stated that she will not vote for any bill that increases the national debt limit, and her opposition is not a surprise. Still, that she chose to speak out against the speaker’s bill at the National Press Club in downtown Washington as Mr. Boehner is still trying to round up last minute votes won’t endear her to House leadership.
    The congresswoman said she gave Mr. Boehner credit for offering specific plans during the debt ceiling fight, something she said President Barack Obama hasn’t done. When asked if Mr. Boehner should resign if Congress does increase the country’s borrowing limit, she demurred.
    “I am running for the President of the United States,” she said. “I am not running for the Speaker of the House.”

    • 5:15 pm
    • Last Call: Reid Plans Final Invite to GOP to Talk Compromise
    • by Corey Boles
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    Senate Democrats plan to give Republicans a final offer on how to resolve the debt-ceiling impasse as the clock ticks down toward the Aug. 2 deadline to a potential default on U.S. obligations.
    According to a senior Senate Democratic aide, Majority Leader Harry Reid (D., Nev.) will invite Republican leaders to propose changes to a plan he supports to raise the $14.29 trillion debt ceiling and cut more than $2 trillion from federal budget deficits.
    The aide said that Mr. Reid will put Republicans on the clock, setting a deadline for them to put forward a workable solution to resolving the parties' differences on how to raise the borrowing limit. If they fail to take up the offer, the aide said that Mr. Reid will hold a straight up-or-down vote on his proposal in  "coming days."
    "That would be the last opportunity to avert default and it will be on Republicans," the aide said.
    This last-ditch effort will take place after a House vote on a GOP plan to raise the debt ceiling, expected around 6 p.m. Eastern time. If House lawmakers vote to approve the plan, it would then be sent to the Senate.  Mr. Reid said earlier that he will bring up the House bill for a vote in the Senate on Thursday night, where it is almost certain to be defeated. At that point, the aide said, the Senate leader will make his offer to Senate Republicans.
    Currently, it is widely seen that Mr. Reid's plan  also wouldn't  have sufficient support in the Senate to overcome an expected 60-vote threshold. Democrats are hoping that talks with Republicans will yield changes to that plan that will bring GOP lawmakers on board.

    • 5:24 pm
    • S&P Official: Debate Has Been 'Detrimental'
    • by Damian Paletta
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    John Chambers, the chairman of Standard & Poor’s sovereign-ratings committee, said Thursday that the fight over whether to raise the U.S. government’s debt ceiling had been “even more acrimonious than we had thought and even more detrimental, as a signaling device, to U.S. credit standing than we had thought.”
    The comments from Mr. Chambers, made on a call with analysts about S&P’s warnings on the U.S.’s credit rating, were the latest from top officials at the firm as they weigh whether to downgrade U.S. debt from the triple-A rating it has held for 70 years. Mr. Chambers will be a key player in any decision to downgrade the debt rating or to keep it where it is.
    “The United States benefits from strong checks and balances and strong institutions for 200 years,” he said. “But the debate around the debt ceiling I think has been detrimental, because this has been a self-inflicted debate. This hasn’t been an external shock inflicted upon the people.”

    • 5:30 pm
    • Democratic House Whip Says Debt-Ceiling Vote Is Delayed
    • by The Wall Street Journal
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    WSJ and Dow Jones Newswires are reporting that tonight's debt ceiling vote has been delayed. More news as it develops...

    • 5:49 pm
    • House Vote Is Delayed but Will Come Tonight
    • by Naftali Bendavid
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    A senior Republican leadership aide confirmed that the vote on House Speaker John Boehner’s debt-ceiling proposal has been delayed, but said it will take place later Thursday evening.
    The delay suggests that Republican leaders may not yet have the votes locked down to pass Mr. Boehner’s proposal.
    The office of House Minority Whip Steny Hoyer (D., Md.)  sent out an email announcing that House GOP leaders had postponed votes on Mr. Boehner’s  bill. Democrats oppose the measure, which would raise the debt ceiling in two stages. Senate Democratic leaders have said the Boehner bill is dead on arrival.

    • 5:54 pm
    • GOP 'No' Votes in the Danger Zone
    • by Corey Boles
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    One possible explanation for the abrupt decision by House GOP leaders to delay a vote, originally expected around 6 p.m. Eastern time, on their debt-ceiling bill: The unofficial count of likely Republican “no” votes is creeping into the danger zone.
    As of this earlier afternoon, the number of House Republicans committed to voting no House Speaker John Boehner’s debt-ceiling bill had moved to 19, with a declaration by Rep. Justin Amash (R., Mich.) that he won’t get in line. Leadership can afford to lose only 24 votes from their party. They aren't expected to pick up many, if any, Democratic votes.
    Republican leadership has been working for days to solidify the votes needed to approve the legislation to increase the debt ceiling by $900 billion and to cut federal spending by slightly more than that amount.

    • 6:10 pm
    • The Debt Debate: Good Summer Drama
    • by Mean Streets via Deal Journal
    • Add a Comment
    A WSJ columnist's commentary on why the debt-ceiling debate (or debacle, if you prefer) is a good thing.

    • 6:16 pm
    • Palin to House Republicans: 'We Little Folk Are Watching'
    • by Danny Yadron
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    Former Alaska Gov. Sarah Palin issued a thinly veiled threat in a Facebook post Thursday afternoon for House Republican freshmen who would vote to raise the debt ceiling: primary challenges.
    The warning came about 90 minutes before House Republicans delayed a vote on a debt-ceiling bill as they tried to round up last-minute support.
    “Out here in proverbial politico flyover country, we little folk are watching the debt ceiling debate with great interest and concern,” Ms. Palin writes. “P.S. Everyone I talk to still believes in contested primaries.”
    The former Alaska governor, who has said she will decide on a possible presidential campaign by September, referenced a letter she wrote to all Republican freshmen in November 2010. The Facebook post includes a copy of that letter with sections in bold that Mr. Palin feels “are especially relevant to the current discussion.”
    They include:
    -  “Never forget the people who sent you to Washington. Never forget the trust they placed in you to do the right thing."


    - “Republicans campaigned on a promise to rein in out-of-control government spending... These are promises that you must keep.”
    - “When the Left in the media pat you on the back, quickly reassess where you are and readjust, for the liberals’ praise is a warning bell you must heed. Trust me on that.”

    Ms. Palin of course doesn't explicitly tell House Republicans to vote down Speaker John Boehner’s debt-ceiling bill. But she does echo many of the arguments made by conservative groups that oppose the measure. The former governor is the second tea-party star to cause headaches for House leadership Thursday. Earlier this afternoon, Rep. Michele Bachmann (R., Minn.) suggested the Boehner plan is not “serious.”

    • 6:29 pm
    • GOP Leaders Calling All Votes
    • by Siobhan Hughes
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    House Speaker John Boehner (R., Ohio) began calling Republicans into his office in an effort to tamp down a revolt that threatens passage of his revised debt measure, but his soft approach appeared to do little to change any minds.
    "I'm still where I was before--I'm still a bloody and beaten 'no,'"  Rep. Louie Gohmert (R., Texas) told reporters after he left the leader's chambers. He said that the Republican leader was “very respectful and I very much appreciate his approach. So I respect him and he knows I’m still a 'no.'"
    It wasn’t clear how many votes Republicans still needed, but their outreach to those colleagues most opposed to the Boehner measure suggested concern that they lacked votes for passage.
    Among those who emerged from leadership chambers:
    - Rep. Jason Chaffetz (R., Utah), another lawmaker who has planned to vote against the Republican debt plan, emerged from the chambers to say he was also still a no vote.
    - Rep. Jeff Flake (R., Ariz.), who also has said he would vote no, declined to comment, saying his conversation was private. Asked whether he was summoned in an effort to win his vote, he said, “I think that’s rather obvious."
    - Rep. Jeff Duncan, (R., S.C.) has been a no vote. He emerged from a discussion in Mr. Boehner’s office and said he’ll have to pray on it.
    - South Carolina Republican Mick Mulvaney, also says he'll pray about the vote.

    • 7:00 pm
    • Cost to Insure Treasurys Retreats From Record
    • by Katy Burne
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    The cost of derivatives protecting against a U.S. default sometime in the next 12 months pulled back from record territory Thursday as reports circulated that the government may be considering how it will function if its $14.29 trillion borrowing limit isn't lifted by the Aug. 2 deadline.
Credit-default swaps, which compensate investors for losses on bonds or loans, were quoted at €75,000, or about $107,300, to cover €10 million of Treasurys for one year, down from €80,000 a year earlier Thursday and €83,000 Wednesday, according to Markit data.
A Treasury spokeswoman said in a statement that, "while only Congress has the ability to ensure the government pays all of its bills, Treasury will provide more information as it gets closer to Aug. 2 regarding how [it] would operate without new borrowing authority if the debt limit is not increased."
Otis Casey, a credit analyst at Markit in New York, said: "The markets may be interpreting the contingency planning as the equivalent of more time beyond the Aug. 2 deadline."

    • 7:03 pm
    • Latest Unofficial House 'No' Count: 20
    • by Naftali Bendavid and Corey Boles
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    The Journal’s Capitol Hill team now counts 20 House Republican “no” votes against the House leadership’s debt-ceiling bill.
    The latest naysayer is Rep. Tim Scott, (R., S.C.), who joined two colleagues in the House chapel, listening to Christian music on his iPad as he entered.
    "I think divine inspiration already happened," Mr. Scott said. "I was a lean no. Now I'm a no."
    House Speaker John Boehner (R., Ohio) earlier in the evening abruptly postponed a vote on his proposal to cut federal spending and lift the debt ceiling. Mr. Boehner could afford to lose no more than 24 Republican votes to be assured of getting his proposal through the House. The postponement suggests House leaders are lighting prayer candles of their own.

  • House Speaker John Boehner (R., Ohio) just walked into House Majority Whip Kevin McCarthy's (R., Calif.) office, where meetings have been under way to persuade wavering Republican lawmakers to vote for the debt-ceiling bill.

    • 7:30 pm
    • McCotter, Bachmann Choose Different Paths in Debt Debate
    • by Joseph B. White
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    Two Republican presidential candidates with votes on the House leadership’s “Budget Control Act” split on the issue.
    Rep. Thaddeus McCotter (R., Mich.) delivered a speech on the floor of the House earlier Thursday endorsing the bill,  scoring points with House Speaker John Boehner (R., Ohio) and other leaders who have been scrambling for votes all day.
    Also earlier Thursday, Rep. Michele Bachmann (R., Minn.)  held forth at the National Press Club and suggested the Boehner bill wasn’t serious.
    Mr. McCotter is a long shot in the crowded Republican field. Ms. Bachmann has been placing second in some polls of Republican primary voters.

    • 7:35 pm
    • Vote Later, Maybe. Now, Pizza.
    • by Siobhan Hughes
    • Add a Comment
    "At 8:30 p.m. we'd have a better idea if they're going to take action tonight."
    So said Senate Majority Leader Harry Reid (D., Nev.) on the Senate floor. Mr. Reid is waiting to see if House Republicans can pass their “Budget Control Act” to raise the debt ceiling in two phases. Mr. Reid has said the bill is dead on arrival in the Senate. House leaders are still scrambling to line up the votes to pass their bill, but say they expect to start moving again tonight.
    Meanwhile, the office of House Majority Whip Kevin McCarthy (R., Calif.) just had 19 boxes of pizza delivered on loading carts.

    • 8:55 pm
    • Japan Opens Little Changed
    • by Kana Inagaki
    • Add a Comment
    The Nikkei is off 0.2% at 9878.38, fluctuating above and below break-even, as investors await a key U.S. debt-ceiling vote with sentiment hurt by sluggish earnings from Nintendo, Sony, and TDK. Analysts peg the index range for today at 9800-9950.

  • South Korea’s Kospi is lurching in and out of positive territory in early trade amid a lack of any strong momentum as investors keenly watch for any developments regarding U.S. debt negotiations and a pending vote among the House of Representatives; the index is down 0.2% at 2152.01 with foreigners starting off as net sellers of local shares, albeit in modest volume.

    • 9:30 pm
    • Asia Mixed on U.S. Debt Talks
    • by Leslie Shaffer
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    Asian markets were mixed in choppy trade Friday amid continued concern over the stalled negotiations on raising the U.S. debt ceiling, with a key House vote delayed Thursday night, while key Japanese tech plays dropped on poor earnings reports.
    "Investors are really sitting on their hands, waiting to see what the outcome of the U.S. debate is," said Forsyth Barr Investment Advisor Peter Young in New Zealand.
    In the U.S., the House of Representatives delayed a vote on Speaker John Boehner's plan to raise the federal borrowing limit as he struggled to stem a revolt from conservative Republican members, leaving U.S. government finances in jeopardy five days before a possible default.
    "It's been demonstrated that domestic politics are overriding America's concern about its global economic standing," said CMC Markets chief market strategist, Michael McCarthy, noting that unless the resolution is a best-case scenario, with significant spending cuts and increased tax revenues, the U.S. is likely to lose its triple-A rating.
    Japan's Nikkei Stock Average edged up 0.1%, Australia's S&P/ASX 200 was down 0.1%, South Korea's Kospi Composite fell 0.2% and New Zealand's NZX-50 tacked on 0.4%.
    Dow Jones Industrial Average futures were eight points higher in screen trade.

    • 9:44 pm
    • No Word From House GOP Leaders. Democrats Stir the Pot on Pell Grants.
    • by Joseph White
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    House members have been to dinner, and a few have wandered back to the Capitol from nearby eateries, but so far no word that House Speaker John Boehner has corralled enough wayward House Republicans to reschedule the stalled vote on his proposed “Budget Control Act.”
    Democrats, looking to stir up their own base, are tweeting an article in the Hill quoting complaints from some dissident Republicans about increased funding for Pell Grant student loans contained in the Boehner bill. It’s unclear whether those complaints will result in any changes to the Speaker’s bill.

    • 9:51 pm
    • No Drama At the White House
    • by Carol E. Lee
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    If there's any nail-biting at the White House over the cliffhanger in the House it was contained behind the scenes and out of sight.
    President Barack Obama spent the first part of the evening in the Oval Office, before heading to the residence. He was updated by aides on the status of events on the Hill.
    Earlier in the evening, White House staff was keeping in touch with the Hill through emails and phone calls, and were monitoring the situation on TV, while waiting for takeout.
    Administration officials had been expecting the bill to pass the House Thursday night, and for the focus to immediately shift to the Senate. Now they’re waiting, and waiting...

    • 10:14 pm
    • Dollar Edges Higher Against Asian Currencies
    • by Isabella Steger
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    The U.S. dollar is posting small gains against Asian currencies late Thursday night, tracking the euro's weakness overnight and as investors take profits on the dollar's slide this week.
    Against the South Korean won, the dollar is up at 1,053.10 from 1,051.70. The dollar is also making small gains against the Singaporean dollar, Indonesian rupiah, Philippine peso and the Australian dollar.

    • 10:33 pm
    • House Majority Whip: No Vote Tonight
    • by Joseph B. White
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    House Majority Whip Kevin McCarthy (R. Calif.) tells reporters there will be “no vote tonight.” The White House has told reporters they don’t expect any more news tonight.

    • 10:46 pm
    • Australia's S&P/ASX 200 Hits 10-Month Low
    • by David Rogers
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    Australia's S&P/ASX 200 index is down 0.7% at 4432.4 after hitting a fresh 10-month low of 4425.5 following news from U.S. Republican senator McCarthy that there will be no House vote on a debt deal late Thursday in the U.S. Earlier, a scheduled vote was postponed.

    • 11:07 pm
    • USD/JPY Hits 4-Month Low
    • by Andrew Monahan
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    The dollar hits a new four-month low against the Japanese yen, at 77.48, after the House cancels a vote on the debt-ceiling plan, adding to the yen's safe-haven appeal.

    • 11:10 pm
    • EUR/USD To Keep Seesawing On Debt Woes
    • by Andrew Monahan
    • Add a Comment
    The EUR/USD seesaws after the U.S. House cancels a vote on the Boehner debt-ceiling plan, and is likely to continue bouncing back and forth, sandwiched between debt woes on both sides of the Atlantic, says Mitsuru Sahara, a senior FX dealer at Bank of Tokyo-Mitsubishi UFJ. "The dollar, the euro, take your pick, both are going to keep struggling with their respective debt problems, so trade in the euro-dollar should remain choppy," Sahara says. "I'd say 90% or more of people in the market have priced in expectations for the U.S. to avoid a default, but with this now down to the wire, there's a real threat of sovereign downgrades regardless of the outcome." Meanwhile, the euro continues to struggle with uncertainty over the risk of further sovereign woe contagion, he says. The EUR/USD is at 1.4327, up from its intraday low at 1.4282 hit after headlines on the U.S. House vote cancellation.

    • 11:13 pm
    • Senate Dem Whip: Onus Lies with Boehner
    • by Michael R. Crittenden
    • Add a Comment
    Senate Democratic Whip Richard Durbin (D., Ill.) said after the postponement of the House vote that the onus lies with House Speaker John Boehner to move legislation, particularly after the Speaker said Monday evening in a nationally televised address that he had a plan to raise the debt ceiling. Durbin said lawmakers are "running out of time and options" to move legislation before the Aug. 2 deadline, and said waiting until Monday to pass legislation could have repercussions.
    "That is tempting fate. There's too much at stake here and we're likely to have some very negative consequences in our economy if we don't move quickly before this weekend is over," Durbin said.

    • 11:21 pm
    • Democrats Seek Profit in Boehner's Loss
    • by Joseph B. White
    • Add a Comment
    House Republicans appeared to be in disarray late Thursday, and Democrats immediately began looking to profit from their loss.
    Senate Majority Leader Harry Reid (D., Nev.) waited all day Thursday for House Republicans to pass their bill so he and his fellow Democrats in the Senate could kill it, and advance their own debt limit raising/budget cutting measure. Tomorrow, with less than five days to go before the Aug. 2 deadline, Senate Democrats may try a new tactic.
    “We’re running out of time and options but if there’s an agreement, a real agreement, things can move quickly in the Senate and the House,” Sen. Dick Durbin, (D., Ill.) said Thursday night after House Republicans put off their vote.
    Other Democrats used the occasion to portray House GOP leaders as unable to manage their conservative faction.
    House leaders have called a meeting of their caucus for Friday morning.

    • 11:27 pm
    • USD/KRW Up In Volatile Trade
    • by Jieun Shin
    • Add a Comment
    The USD/KRW is at 1,052.80 up from 1,051.70 late Thursday in Seoul, but the pair has been volatile, largely between 1,052 and 1,054 so far, amid ongoing uncertainties over debt-ceiling negotiation in the U.S. "Long dollar positions (against the won) are followed by stop-loss selling and then some long dollar positions again. Players are switching their positions swiftly because it's hard to predict the dollar's direction against other currencies amid uncertainty over possible credit-ratings downgrades for the U.S.," says a local bank trader. Among domestic leads, the Kospi (down 0.9%) lends support to the pair, but active USD selling from exporters for month-end settlements will likely continue to limit the pair's upside, he adds. A 1,050-1,055 range is tipped for the rest of the session.

    • 11:43 pm
    • Asian CDS Flat As Investors Wait on Sidelines
    • by Natasha Brereton-Fukui
    • Add a Comment
    Asian CDS are steady Friday as the looming deadline for lifting the U.S. debt ceiling keeps investors on the sidelines. U.S. Republicans are forced to delay a planned vote on House Speaker Boehner's proposal, as they're unable to secure enough support within their own ranks to back it. Spreads on the Markit iTraxx Asia ex-Japan CDS index are recently quoted at 116-117 bps versus 116.5-117.5 bps Thursday. "There's a lack of conviction and no clear trend," one Asia-based trader says; players "are just widening the bid-offer spread." Despite the general market apathy, the Hong Kong government's new inflation-linked retail bond makes a strong debut in initial trading; it is recently quoted up 6%.

    • 11:51 pm
    • Citi's Buiter: No Longer Negligible Risk of Default
    • by Isabella Steger
    • Add a Comment
    From a note from Citi's global economist Willem Buiter:
    The extraordinary brinkmanship about the U.S. Federal debt ceiling is being carried to the point that what was no more than a ‘tail risk’ of a selective US sovereign default has morphed into a still small but no longer negligible risk of default. The designations of that eventuality as ‘calamity’ (Chairman Bernanke), ‘Armageddon’ (President Obama), ‘suicide’ (Citi’s Steven Wieting) and ‘insanity’ (former Presidential Adviser Austan Goolsbee) are not an exaggeration. The damage would be so severe, because a default due to a failure to raise the Federal debt ceiling is neither a conventional ‘can’t pay’ default (the country does not have the resources to service the Federal debt in full) nor a conventional ‘won’t pay’ default (when a solvent united government and country “cocks a snook” at its external creditors), but a needless default – we have the resources to honor the debt, we really did not want to default, but we were so busy fighting among ourselves that the deadline passed.
    The urgency of the longer-term U.S. fiscal challenge – restoring sustainability to the US public finances – has been increased because of the Federal debt ceiling kerfuffle. Some may find it surprising that any rating agency would rate as AAA a nation with the general government debt and deficit configuration of the U.S., especially given its modest prospective growth rates for real and nominal GDP. There are complex interrelationships between rating agencies and sovereigns, especially the large sovereigns. On the one hand, rating agencies provide ratings for sovereign debt issues and sovereign issuers. On the other hand, sovereigns shape the regulatory and business climate under which rating agencies operate. The dangerous flirtation of the US sovereign with a ‘technical’ default has, however, given the leading rating agencies the courage of their convictions.

    • 11:53 pm
    • Gold Lower Despite U.S. Debt Vote Delay
    • by Clementine Wallop
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    Gold is lower despite another setback in the stalled negotiations on raising the U.S. debt ceiling after Republicans were forced to delay a vote late Thursday on House Speaker John Boehner's proposals as they were unable to rally enough support to guarantee passage. Spot gold is at $1,616.10 a troy ounce, down $1.10 from its previous close, even as the USD weakens against the EUR in response to the vote delay. The EUR/USD is at 1.4344 vs 1.4330 late Thursday; dollar-priced commodities become cheaper to investors holding other currencies when the greenback is weak. Traders say gold's lower price could be attributable to anticipatory profit-taking in advance of a possible deal this weekend ahead of the Aug. 2 deadline to agree on a new U.S. debt ceiling and avoid a possible credit downgrade and a possible debt default. A resolution on the debt limit will be bearish for gold as it will boost risk appetite and pressure demand for safe-haven assets, MF Global says, although it expects the lingering debt crisis in the eurozone to lend near-term support.

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