Financial markets brace for default as Biden, Republicans dig in on debt limit

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2 years ago

May 9, 2023

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The partisan standoff over the debt limit, which hardened over the weekend when 43 Senate Republicans said they would not support a clean debt-limit increase, sets the stage for severe turbulence in the financial markets, experts warn.

The yield on Treasury bonds maturing next month spiked last week, signaling that investors are already preparing for the possibility that President Biden and Republican leaders in Congress won’t reach a deal before the Treasury Department runs out of money next month.

Biden will meet with the top four congressional leaders at the White House Tuesday to discuss how to avoid a default, but lawmakers expect little progress from the meeting. It’s the first face-to-face meeting between Biden and Speaker Kevin McCarthy since Feb. 1.

There’s growing pessimism in Washington and the financial markets that political leaders will negotiate a long-term deal by early June, the deadline set by Treasury Secretary Janet Yellen.

If an agreement doesn’t come together in the next month, congressional leaders will have to agree to a short-term extension of the debt limit to give themselves more time to negotiate. More debt ceiling coverage from The Hill: Pressure grows on Biden to bend in debt ceiling talks Debt limit battle: How we got here

Without a short-term agreement, the US would go past the so-called “X-date” and face major turmoil in the markets.

“I genuinely believe there’s a better-than-50-percent chance that there will be default, it will occur over a weekend and when the chaos it creates becomes obvious to all the players, they’ll have to reach some sort of accommodation,” said former Sen. Judd Gregg (R-N.H.), who previously served as Senate Budget Committee chairman and an advisor to Senate Republican Leader Mitch McConnell’s (Ky.) leadership team.

“The potential is pretty dire,” he warned. “Right now, you don’t have the leadership to solve the problem, that’s the bottom line.”

Gregg said McCarthy faces a challenge to his speakership if he brings a debt-limit bill to the House floor without major fiscal reforms, but the cuts that he’s proposing don’t have a chance of passing the Senate.

McConnell’s support for a letter signed by 43 Senate Republicans declaring they will not support “any bill that raises the debt ceiling without substantive spending and budget reforms” has failed to move Democrats away from insisting on a clean debt-ceiling increase.

“I don’t know what Democrats have to negotiate,” said a senior Senate Democratic aide, who pointed out that Republicans agreed to raise the debt limit three times under former President Trump without drama. “We’re not the ones being inconsistent.”

“At the end of the day, a lot of their behavior is playacting,” the aide said, predicting a spike in stock and bond market volatility will pressure Republicans into backing off their demands. “They have investments, too.”

The aide, pointing to the downgrade of the nation’s credit rating in the 2011 debt-limit standoff, said that this year’s battle in Washington over the debt ceiling would also shake the financial markets.

“We have in the past. I don’t know why this would be different,” the aide said.

Financial markets are already starting to show signs of stress related to the impasse over the debt ceiling.

One-month Treasury bills maturing around a projected date in early June, when the government could run out of money, saw their yields spike to 5.76 percent last week.

Yields have climbed far above recent averages closer to 4.5 percent and significantly higher than the recent low of 3.3 percent in April.

“The Treasury bills curve appears to imply risk of disruption in June, July, and October,” Goldman Sachs chief economist Jan Hatzius wrote in a note last week to investors.

Treasury bills maturing in early June were trading at more than a 50-basis point discount compared to May and July at the end of last week.

“Investors are paying a healthy premium to own bills that mature in May while demanding hefty compensation to hold T-bills that are maturing in the first half of June,” analysts for Wells Fargo wrote in a note to investors last week.

Wall Street insurance policies, which are known as credit default swaps, against one-year Treasuries hit a record-high spread of 1.77 percent late last week in a spike that was notable both for its timing and its size.

“There is likely genuine fear that a divided government and increased political polarization could make finding a solution less likely. Meanwhile, the dual threats of rising deficits (with larger federal payments, some indexed to inflation) and higher Treasury debt service costs also increase the chance of an accident, contributing to the higher perceived riskiness of owning US debt,” Deutsche Bank analyst Steven Zeng wrote in a May 5 note.

Uncertainty in the Treasury market, which is already dealing with one of the fastest quantitative tightening cycles in decades, could spell more trouble for the U.S. banking sector.

Sen. John Cornyn (Texas), an advisor to the Senate Republican leadership team, said local and regional banks in his state worried about losing deposits.
“This is a very dangerous situation. There’s been a big shift in deposits to places people perceive as safer,” he said. “All of them are nervous, our community bankers, our regional bankers. We need to try to calm this down.”

Cornyn said the possibility of a national default isn’t helping to calm the jittery banking sector.

“I think it’s creating unnecessary anxiety,” he said.

One senior Senate Republican aide warned that a drop in demand for Treasury securities could trigger a broader market selloff.

Treasury security auctions will likely become increasingly sensitive to the Treasury Department’s looming X-date, analysts say.

“Yields are elevated beginning with the June 6 maturity, which the Treasury in January suggested was the soonest the Treasury could exhaust resources under the debt limit. The yield is highest around mid- to-late-July maturities, when we think the Treasury will have exhausted resources under the debt limit if it has not in June,” analysts for Goldman Sachs wrote.

Auctions scheduled for this Thursday for four-week and eight-week bills due to mature within this time frame could see some additional stress, as could auctions on May 25, June 8 and June 15.

The Bipartisan Policy Center argued in an analysis published Tuesday that “managing Treasury security auctions and meeting all obligations will become increasingly challenging as reserves dwindle.”

“Concerns are also mounting that the country could find itself in a similar position to 2011, when Standard & Poor’s downgraded the U.S. from its AAA rating,” the think tank said.

Yellen warned in an interview with ABC’s “This Week” that “it’s widely agreed that financial and economic chaos will ensue” if Congress fails to act by the deadline. Debt limit battle: How we got here US could default on national debt as soon as early June: analysis

A report published by the Penn Wharton Budget Model Monday said the deadline to raise the nation’s debt ceiling will hit sooner than previously thought because tax receipts in April fell below projections.

Alexander Arnon, the director of business tax and economic analysis for the Penn Wharton Budget Model, said “we found, as noted by the Treasury secretary and by the Congressional Budget Office, that tax receipts in April came in quite a bit lower.”

“There was a drop off [in tax receipts] relative to what was expected and we are much closer [to default] than people had hoped earlier this year,” he said.

UK

Virginia Giuffre, who accused Prince Andrew of sexual assault, has died, her family says

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60 mins ago

April 26, 2025

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Virginia Giuffre, who accused Prince Andrew of sexual assault, has died, her family says

Virginia Giuffre, who accused Prince Andrew of sexual assault, has died aged 41.

In a statement to Sky’s US partner network NBC News on Friday, her family said she took her own life in the Perth suburb of Neergabby, Australia, where she had been living for several years.

“It is with utterly broken hearts that we announce that Virginia passed away last night at her farm in Western Australia,” her family said.

“She lost her life to suicide, after being a lifelong victim of sexual abuse and sex trafficking.

“Virginia was a fierce warrior in the fight against sexual abuse and sex trafficking. She was the light that lifted so many survivors.

“In the end, the toll of abuse is so heavy that it became unbearable for Virginia to handle its weight.”

Police said emergency services received reports of an unresponsive woman at a property in Neergabby on Friday night.

“Police and St John Western Australia attended and provided emergency first aid. Sadly, the 41-year-old woman was declared deceased at the scene,” a police spokeswoman said.

“The death is being investigated by Major Crime detectives; early indication is the death is not suspicious.”

Sexual assault claims

Ms Giuffre sued the Duke of York for sexual abuse in August 2021, saying Andrew had sex with her when she was 17 and had been trafficked by his friend, the billionaire paedophile Jeffrey Epstein.

The duke has repeatedly denied the claims, and he has not been charged with any criminal offences.

In March 2022, it was announced Ms Giuffre and Andrew had reached an out-of-court settlement – believed to include a “substantial donation to Ms Giuffre’s charity in support of victims’ rights”.

She stuck by her version of events until the end

Of the many dozens of victims of Jeffrey Epstein, it was Virginia Giuffre who became the most high-profile.

She was among the loudest and most compelling voices, urging criminal charges to be brought against Epstein, waving her right to anonymity in 2015.

She told how he and Ghislaine Maxwell groomed her and “passed around like a platter of fruit” to be used by rich and powerful men.

But her name and face became known around the world after she accused Prince Andrew of sexually abusing her when she was 17 years old.

The picture of her together with the prince and Maxwell at the top of a staircase, his hand around her waist, is the defining image of the whole scandal.

Prince Andrew said he had no memory of the occasion. But Giuffre stuck by her version of events until the end.

‘An incredible champion’

Sigrid McCawley, Ms Giuffre’s attorney, said in a statement that she “was much more than a client to me; she was a dear friend and an incredible champion for other victims”.

“Her courage pushed me to fight harder, and her strength was awe-inspiring,” she said. “The world has lost an amazing human being today.”

“Rest in peace, my sweet angel,” she added.

Dini von Mueffling, Ms Giuffre’s representative, also said that “Virginia was one of the most extraordinary human beings I have ever had the honour to know”.

“Deeply loving, wise, and funny, she was a beacon to other survivors and victims,” she added. “She adored her children and many animals.

“She was always more concerned with me than with herself. I will miss her beyond words.

“It was the privilege of a lifetime to represent her.”

Ms Giuffre said at the end of March she had four days to live after a car accident, posting on social media that “I’ve gone into kidney renal failure”. She was discharged from hospital eight days later.

Raised mainly in Florida, she said she was abused by a family friend early in life, which led to her living on the streets at times as a teenager.

She said that in 2000, she met Ghislaine Maxwell, a British socialite who was convicted in 2021 on federal sex trafficking and conspiracy charges and was sentenced to 20 years in prison.

Ms Giuffre said Maxwell then introduced her to Epstein and hired her as his masseuse, and said she was sex trafficked and sexually abused by him and associates around the world.

‘A survivor’

After meeting her husband in 2002, while taking massage training in Thailand at what she said was Epstein’s behest, she moved to Australia and had a family.

She founded the sex trafficking victims’ advocacy charity SOAR in 2015, and is quoted on its website as saying: “I do this for victims everywhere.

“I am no longer the young and vulnerable girl who could be bullied. I am now a survivor, and nobody can ever take that away from me.”

:: Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.

UK

Who will be at the Pope’s funeral – and who won’t be

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1 hour ago

April 26, 2025

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Who will be at the Pope's funeral - and who won't be

The Pope’s funeral will take place today at St Peter’s Basilica at the Vatican.

A pope’s funeral traditionally brings world leaders together, and some have already revealed they are attending.

Watch full coverage of the Pope’s funeral live on Sky News from 8am

Here’s a look at the list.

Prince William

The Prince of Wales will attend the funeral of Pope Francis on behalf of the King, Kensington Palace has said.

The King was in Rome with Queen Camilla earlier this month, and met the pontiff at the Vatican.

The trip came just a week-and-a-half after Buckingham Palace confirmed the King had been taken to hospital following side effects related to his ongoing cancer treatment.

Sir Keir Starmer

Number 10 has confirmed the prime minister received an invite and will attend the ceremony.

Speaking on Tuesday, Sir Keir said there had been “an outpouring of grief and love” for the Pope.

He added: “I think it reflects the high esteem in which he was held, not just by millions and millions of Catholics, but by many others, across the world, myself included.”

Donald Trump

The US president was one of the first to confirm he would be flying to Rome, adding he would be joined by first lady Melania Trump.

Writing on his social media platform Truth Social on Monday, he said: “Melania and I will be going to the funeral of Pope Francis, in Rome. We look forward to being there!”

The Pope had been critical of Mr Trump at times during his tenure.

In January, he said it would be a “disgrace” if the president went ahead with his crackdown on immigration, telling an Italian television station: “It would make the migrants, who have nothing, pay the unpaid bill.

“It doesn’t work. You don’t resolve problems this way.”

Volodymyr Zelenskyy

The Ukrainian president, who met the Pope three times, is expected to attend, according to officials in Ukraine.

In his tribute, Mr Zelenskyy said his country was grieving the Pope and recalled how he often prayed for peace in Ukraine.

Emmanuel Macron

The French president told local reporters he would be going to the funeral.

In his tribute on Monday, Mr Macron said of the Pope: “In this time of war and brutality, he had a sense for the other, for the most fragile.”

Javier Milei

The president of Pope Francis’s native Argentina will attend, despite having launched insults at Francis in recent years.

Before taking office in December 2023, the far-right politician called him “an imbecile, the representative of evil on Earth”.

Mr Milei alluded to their “differences” in his tribute to the late Pope, writing: “It is with profound sorrow that I learned this sad morning that Pope Francis, Jorge Bergoglio, passed away today and is now resting in peace.

“Despite differences that seem minor today, having been able to know him in his goodness and wisdom was a true honour for me.”

Lula da Silva

The Brazilian president and first lady Janja Lula da Silva will be at the funeral, the country’s government announced.

Brazil has also declared a seven-day mourning period for the Pope.

“Humanity is today losing a voice of respect and welcome for others,” the president said in his tribute.

“Pope Francis lived and propagated in his daily life the love, tolerance and solidarity that are the basis of Christian
teachings.”

Ursula von der Leyen

The EU Commission President confirmed she would be attending after calling Francis a worldwide inspiration.

“He inspired millions, far beyond the Catholic Church, with his humility and love so pure for the less fortunate,” she said in her tribute.

Council President Antonio Costa, Parliament President Roberta Metsola are also expected to attend.

Here are some of the other notable attendees:

• Ireland’s taoiseach Micheal Martin
• Spain’s King Felipe and Queen Letizia
• Albanian president Bajram Begaj
• Angola’s president Joao Lourenco
• Austrian president Alexander Van der Bellen
• Bangladesh’s chief adviser and interim leader Muhammad Yunus
• Belgium’s King Philippe and Queen Mathilde, along with prime minister Bart De Wever
• Canada’s governor general Mary Simon
• Cape Verde president Jose Maria Neves
• Croatia’s president Zoran Milanovic
• Cyprian president Nikos Christodoulides
• Czech Republic’s prime minister Petr Fiala
• Democratic Republic of Congo president Felix Tshisekedi
• Dominican Republic’s president Luis Abinader
• East Timor’s president Jose Ramos-Horta
• Ecuador’s president Daniel Noboa
• Estonia’s president Alar Karis
• Finland’s president Alexander Stubb
• Gabon’s president Brice Oligui Nguema
• German president Frank-Walter Steinmeier and outgoing chancellor Olaf Scholz
• Greece’s prime minister Kyriakos Mitsotakis
• Honduras president Xiomara Castro
• Hungary’s president Tamas Sulyok
• Italy’s president Sergio Mattarella and prime minister Giorgia Meloni
• Latvian president Edgars Rinkevics
• Lithuanian president Gitanas Nauseda
• Moldova’s president Maia Sandu
• Netherlands’ prime minister Dick Schoof
• New Zealand’s prime minister Christopher Luxon
• Norway’s Crown Prince Haakon and Crown Princess Mette-Marit
• The Philippines’ president Ferdinand Marcos Jr
• Poland’s president Andrzej Duda
• Portugal’s president Marcelo Rebelo de Sousa and prime minister Luis Montenegro
• Romania’s interim president Ilie Bolojan
• Sweden’s King Carl XVI Gustaf, Queen Silvia and prime minister Ulf Kristersson
• Switzerland’s president Karin Keller-Sutter

Who won’t be there?

Vladimir Putin

The Russian president will not be attending the funeral, the Kremlin has confirmed.

But the controversial leader paid tribute to the Pope, writing a message to Cardinal Kevin Farrell, who is interim chief of the Catholic Church.

“Please accept my most sincere condolences on the passing of His Holiness Pope Francis,” Mr Putin said.

“Throughout the years of his pontificate, he actively promoted the development of dialogue between the Russian
Orthodox and Roman Catholic churches, as well as constructive cooperation between Russia and the Holy See.”

Benjamin Netanyahu

The Israeli prime minister is not expected to attend, with the country’s ambassador Yaron Sideman going instead.

The Jewish state and the Vatican have had strong relations in the past, with Israel sending a presidential delegation to the funeral of Pope John Paul II in 2005, and Pope Francis visiting Israel in 2014.

But their relationship has deteriorated since the start of the war in Gaza.

A month after the conflict started in 2023, a dispute broke out over whether Pope Francis had used the word “genocide” to describe events in Gaza. Palestinians who met with him said he did, but the Vatican said he did not.

The Pope met relatives of Israeli hostages on the same day.

Israeli officials have since lobbied the Vatican to be more forceful in its condemnation of Hamas.

In January, the Pope called the humanitarian situation in Gaza “shameful”, prompting criticism from Rome’s chief rabbi, Riccardo Di Segni, who accused Francis of “selective indignation”.

Rabbi Di Segni says he will be attending the funeral, despite it taking place on the Jewish sabbath.

Is there a seating plan?

The seats are assigned in advance, with the heads of state sitting in French alphabetical order based on their country’s name, rather than on the individual’s.

This applies to everyone apart from the presidents of Italy and Argentina, who get the best seats because the Pope lived in Italy and was an Argentinian native.

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Vincent Nichols: British cardinal who will be in the conclave says picking the next pope is ‘intimidating’

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1 hour ago

April 26, 2025

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Vincent Nichols: British cardinal who will be in the conclave says picking the next pope is 'intimidating'

The head of the Catholic Church in England and Wales has told Sky News it’s “intimidating” to be one of those responsible for choosing the next pope.

Vincent Nichols is among four UK cardinals in Rome for the Pope’s funeral on Saturday.

Following the funeral, and after nine days of mourning, cardinals from around the world will gather in the Vatican’s Sistine Chapel to cast their votes, with white smoke announcing to the world when a new pope has been elected.

Cardinal Nichols told Sky’s Anna Botting: “I hope nobody goes into this conclave, as it were, with the sole purpose of wanting to win. I think it’s very important that we go in wanting to listen to each other… It has to be together, trying to sense what God wants next. Not just for the church.”

He described the procession that took Pope Francis to lie in state as “the most moving thing I’ve ever attended here”.

Describing the Pope as a “master of the gesture and the phrase”, he also recalled the pontiff’s last journey away from the Vatican.

Cardinal Nichols said Pope Francis had visited the Regina Coeli prison, telling the inmates: “You know, except for the grace of God, it could well have been me … Don’t lose hope, God has you written in his heart.”

The Pope later told his doctor his last regret was not being able to wash the feet of the prisoners during that visit.

Becoming emotional, he also said the final message he would like to have given Pope Francis is “thank you”.

The 88-year-old died peacefully on Easter Monday, the Vatican confirmed.

Heads of state – including Sir Keir Starmer, Donald Trump and Emmanuel Macron – have all confirmed their attendance at his funeral, which takes place on Saturday at St Peter’s Square.

Prince William will attend on behalf of the King, Kensington Palace has said.

You can watch full coverage of the funeral live on Sky News on Saturday

Talking about the seating plan at the funeral, Cardinal Nichols said he understood it to be “royalty first, then heads of state, then political leaders”.

Cardinal Nichols explained event would be “exactly the same Catholic rite as everyone else – just on a grander scale”.

In a break from tradition, Pope Francis will be the first pope in a century to be interred outside the Vatican – and will instead be laid to rest at his favourite church, Santa Maria Maggiore Basilica in Rome’s Esquilino neighbourhood.

He will also be buried in just one simple wooden coffin, instead of the traditional three coffins which are usually used for pontiffs.

Born in Crosby near Liverpool, Cardinal Vincent Nichols hoped to be a lorry driver as a child – but as a teenager reportedly felt the calling to join the priesthood while watching Liverpool FC.

As cardinal, he is known for leading the church’s work tackling human trafficking and modern slavery, for which he received the UN Path to Peace Award.

He was criticised by the UK’s Independent Inquiry into Child Sexual Abuse, which said he “demonstrated a lack of understanding” of the impact of abuse and “seemingly put the reputation of the church first”.

Cardinal Nichols, responding to the findings, previously told Sky News he was “ashamed at what has happened in the context of the Catholic Church” and promised to improve the church’s response.

He has appeared to rule himself out of the running for pope, telling reporters he was “too old, not capable”.