FirstFT: US debt ceiling impasse pushes price of insuring against default to 11-year high

A political stalemate in Washington over raising the US debt ceiling has pushed the cost of buying insurance against a government default to its highest level in more than a decade, an early sign of market worries about the impasse.

The price of five-year credit default swaps — the most widely traded form of debt insurance — reached its highest since 2012 this month, although at 46 basis points, it remains well below levels during the 2008-09 financial crisis.

The new Republican leadership of the US House of Representatives is demanding deep budget cuts in exchange for raising the federal borrowing limit, but the White House has said it will not negotiate.

In 2011, a stand-off over the debt ceiling led to the US losing its top-notch triple A credit rating. While a default on US federal debt is still viewed as unlikely, investors are moving to protect against, or profit from, the possibility.

US Treasury secretary Janet Yellen has warned that a default, which could theoretically come as early as June, would lead to “catastrophe”. She is set to speak today at the IMF and World Bank spring meetings in Washington.

Apart from that, here’s what else I’ll be keeping tabs on today:

• Results: Citi, JPMorgan Chase, Wells Fargo and BlackRock report.

• France: The country’s Constitutional Council rules on President Emmanuel Macron’s controversial plan to raise the retirement age.

• ECB: The European Central Bank releases long-term interest rates statistics for last month.

Join award-winning FT columnist Stephen Bush and colleagues online on April 19 as they tackle your questions in the run-up to the UK’s 2024 election. Register here for free.

Five more top stories

1. The FBI arrested a 21-year-old junior military employee yesterday over a recent leak of more than 100 highly classified US intelligence documents, which appeared on messaging platform Discord before spreading to Telegram and Twitter. Read more about the suspect, Air Guardsman Jack Teixeira.

2. EXCLUSIVE: One of Charles Schwab’s largest investors sold its entire $1.4bn stake during last month’s banking turmoil amid fears over paper losses on the brokerage giant’s bond portfolio following the collapse of Silicon Valley Bank. Read more about the move by GQG Partners.

3. EXCLUSIVE: Singapore has asked banks to keep quiet on the origins of huge wealth inflows to the city in a tacit reference to China. Regulators gave the directive at a meeting with local banks and international lenders such as UBS, JPMorgan and Citigroup.

4. Brazil’s president called for an end to trade dependence on the US dollar ahead of a meeting with Chinese president Xi Jinping today. Luiz Inácio Lula da Silva’s appeal for developing countries to use their own currencies dovetails with Beijing’s efforts to promote use of the renminbi in global commerce.

5. The UK’s slowing labour market is lifting hopes that inflationary pressures are easing, but economists said the tentative data might not be strong enough to persuade the Bank of England to pause its interest rate rises. Here’s what central bank officials will be looking at in the latest jobs data.

How well did you keep up with the news this week? Take our quiz.

The Big Read

Intel’s fateful bet a decade ago against extreme lithography, which promised unparalleled miniaturisation, turned out to be a historic mistake. This year, it plans to finally use the technology to produce large volumes of chips. At a time when the US has placed advanced chips at the centre of national policy, can Intel regain its lead?

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Chart of the day

The euro has risen to its highest level in a year against the dollar, with investors hoping that falling inflation will persuade the US Federal Reserve to moderate the pace of interest rate rises while expecting a more hawkish approach from the European Central Bank.

Take a break from the news

The Pelican hotel in Miami has a prime South Beach spot and is housed in one of the Art Deco buildings where tour guides like to stop. It’s pistachio green, with 32 rooms and no pool or spa, but that doesn’t matter. The hotel has just emerged from a two-year renovation, its eccentric rooms overhauled and brought back to a shimmering gloss. Take a look at the one-of-a-kind rooms.

Additional contributions by Emily Goldberg