With a deal almost done, the next question yet to be answered is how the rating agencies will respond. I’m not going to bother gaming the new odds of what they do as I don’t think it’s politically such an easy decision for them. Irrespective of their actions, we all know that medicaid and social security weren’t touched at all and medicare was only modestly tweaked in one area and it’s these three programs that have us deserving of a downgrade. Putting this aside, finally for now, attention will quickly shift back to the economy and its current growth prospects. Manufacturing data in China, South Korea, India, Taiwan, Europe/UK all were released and the results point to a continued moderation in business trends. The US ISM will likely do the same at 10am. It is this reality that has the 10 yr note yield at an 8 month low and little changed today notwithstanding the DC deal. Vehicle sales, ISM services, chain store sales and Friday’s payroll will also be of focus.
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