Debt Limit Extentions

Stephen Bernard, in a WSJ article today, on some of the potential market action over the coming week depending on how the debt limit conversation plays out.

Key points from their perspective:

--"Markets bracing for a rocky start if no U.S. debt deal is announced"

--"Relief rally could kick off the week if deal made"

--"Terms of deal could weigh heavily on risks of ratings"

Boehner's scheduled appearance for this evening to discuss a plan passed without apparent comment from his office. If no deal is reached, or even if only a short term deal is reached, long term bonds would suffer with ten years increasing from 2.964% or 3.10% Monday alone according to John Canavan, market analyst at Stone and McCarthy Research Associates. In this case we'd probably also see moves toward commodities and into Yen and Swiss Franks due to their stability.

There's likely a lot of money sitting on the sidelines waiting to see what happens, though. If a long term plan does come out it will be interesting to see how significant the ensuing rally becomes.

If the outcome is a short-term solution that gets us through until 2012, it will be interesting to see what happens politically. Obama's already said he'd veto such a bill, but that was when there was sufficient time to do something different, with the deadline 9 days away, he may be whistling another tune.