Morgan Stanley’s US interest rate strategists have included a lovely set of charts in their latest research note that portray the moves in short-term markets due to the debt ceiling impasse. The strategists stress that the price moves don’t reflect liquidity shortages but are “the functional equivalent of a tightening, which is exactly what the economy does not need now.”
Quite. Click to expand the gory details.
Core deposits:
August maturity T-bills:
2-year US Treasuries relative to overnight indexed swaps (OIS):
(Highly illiquid) 1-year US CDS:
Divergence between real and implied volatilities:
Related link:
Preparing for a US debt disaster – FT Alphaville