Wall Street starts getting nervous

Investors are heading into a weekend with big news potential but no trading opportunities.

By Jim J. Jubak Oct 3, 2013 6:59PM
Image: Stock market (© Zurbar/age fotostock)Traders and investors are getting more nervous as the government shutdown continues with no signs of progress and the Oct. 17 deadline for raising the debt ceiling approached.

The price of credit-default swaps (CDS) used to insure U.S. government debt against the possibility of default climbed to 35.5 basis points Wednesday. That was the highest level in six months, and up from 32 basis points on Friday, Sept. 27. 

But that level is still well below the 62 basis points it cost to insure U.S. government debt against default at the time of last debt ceiling battle in the summer of 2011. That was the highest level since the global financial crisis. (What this means is that an investor would pay 62,000 euros a year to insure 10 million euros of U.S. Treasuries against a default in the next five years. The contract is denominated in euros to offset the impact of a default on the U.S. dollar.) 

This insurance is getting more popular, too, with these CDS contracts ranking as the 15th most traded of the contracts tracked by the Depository Trust & Clearing Corp. in the week through Sept. 27. That's up from a rank of 147th the previous week.

Investors and traders are also starting to shy away from those Treasury bills maturing closest to the Oct. 17 deadline projected by the U.S. Treasury. The difference in yields between the one- and three-month Treasury bills now makes up the biggest gap since the 2008 financial crisis. 

One-month yields have climbed to 0.13% but three-month bills pay just 0.02%. Financial institutions frequently use short Treasury bills for collateral and nobody wants to get caught short on collateral in case of a default. 

All this said, while markets are more nervous, they aren’t exactly very nervous yet -- as the price of CDS indicates. News stories Thursday out of Washington have House Speaker John Boehner saying that he will use a coalition of Democrats and Republicans to pass a debt ceiling extension to avoid default. The speaker’s staff has denied these accounts. And Wall Street analysts who have dug into the details of the government’s cash flow say that Treasury won’t actually run out of the ability to pay the government’s debts until the big bills are due on Nov. 1. (Aren't you relieved?) 

It will be interesting -- a nice neutral word -- to see how traders feel Friday about the risk represented by a weekend with big news potential but no trading opportunities.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. When in 2010 he started the mutual fund he manages, Jubak Global Equity Fund (JUBAX), he liquidated all his individual stock holdings and put the money into the fund. The fund may or may not own positions in any stock mentioned. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here


35Comments
Oct 3, 2013 9:37PM
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Ha, ha, Wall Street starts getting nervous?  The WS hucksters and greedies have been getting nervous about once a year for the last 5 years. This time the laugh is on them because their beloved sugar daddy had to close it doors while waiting for the next shoe to drop.  The US Congress needs to sit down and do something they haven't done for the last 5 years - negotiate and pass a balanced budget.  That doesn't mean threaten the Boomers with cutting off Social Security or threaten the Muslims with another religious war. It means paying the obligations of the US government first and spending money on arms and social crusades with what's left - zero.
Oct 3, 2013 8:14PM
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I wonder if the Twitter Guys are getting Nervous and thus rushing their company to an IPO. C-nb-c's Fast Money had some interesting comments about their current status via the initial filings. It might not be the Moon shoot some have hope for it some of the worries presented prove factual.

Twitter has never made a profit in their history but as per usually, that won't stop nervous Wall Street from selling it as the next Miracle Cure. Selling it or anything else they can shove down our throats.

Oct 4, 2013 1:28AM
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Jim,

 

I thought MSN canned all original content. Can you let us know what is your current relationship w/ MSN Money?

Oct 3, 2013 7:24PM
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He's one man. Me too. You can believe he is orchestrating some sort of sell-off as much as you can believe that my posts are destroying Wall Street. Let's try some facts-- there hasn't been an economy since pre-9/11. Ever since has been a rigged environment. Bush had the currency redesigned for the faster printing presses he bought, he created the wars in Iraq and Afghanistan based on the premise of WMDs that never materialized, he raised the Debt Ceiling more times than any other POTUS, he spent like a profligate fool and didn't pay any bills. He allowed T.A.R.P. but failed to hold banks accountable for getting compromised and failed to consider the national impact of bailing them with Gramm Leach Bliley fully exposing US to corruption. His closed-bid contracts to boobs, his oblivious attitude during the mass termination of more than 14 MILLION careers... 84% of which were household breadwinners and failure to recognize that the Tax Reform Act was hyper accelerating home values while Goldman Sachs' Mark to Market credit facilitation process exposed every municipality, pension fund and America's homes to extreme risk.

Today's stock markets are FIVE YEARS overdue for a massive correction. The Dow isn't worth the 7,000 it was in 2008. No publicly traded business platform in America is able to resort to enterprise and hire personnel at family-sustaining wages. The question HAS to be-- why not? The answer is- because the markets are FALSE and false markets are worthless. How does America resolve the budget impasse? It crashed the markets, let's trash administrative platforms crumble to nothing and lifts the COMPETENT not the glass ceiling, degrees, inheritors or False Elitists.

Oct 3, 2013 7:44PM
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. The Govt is shut down people are nervous recent tensions are escalating Just to add that the hits we are taking to our country are monstrously destructive and blowing/chipping the hell out the foundations of our country.Our USA is losing truth honor credibility sense of pride and trust in our society /government . There is money out  there still a lot , some good aspects of the economy still functioning but many feel less confident instability as if we are all TREADING WATER. How LONG can we Tread Water?????????
Oct 3, 2013 8:58PM
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So what.  O bummer is the one with a well deserved sore rectum here.  It all starts with the leadership - - this nation doesn't have a leader.  Pea brained imbecile elected to presidency by a nation of syphilitic morons.
Oct 4, 2013 9:18AM
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Day One:  Market panics over thought of 1/5 of Federal Govt. not working

Day Two:  Market isn't worried about minor shutdown of bloated entity.

Day Three:  Market panics over partial shutdown.  Whatever will we do?

Day Four:  Market moves again, based solely on partial & irrelevant shutdown

Day Five&Six: Thanks be to God that the Markets close on the weekend.  Politicians still try to panic the citizens with,'vote for me 'cause they are responsible for anything that is wrong or even seems wrong'.

Day Seven:  God rested from having actually done something.  Those who do nothing of value never have to rest....... 

Oct 4, 2013 12:35PM
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The Market seems at this point is giving a collective "Who cares?" to the shutdown.
Oct 3, 2013 7:31PM
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I'm sorry Jim- if my posts are causing your articles to play a Cat & Mouse appearance game with the reader base. This is your FIRST attempt recently at sober Reality. There are- 90 MILLION competent and capable people obviously better at business than the moronic alumni in it now. We are in for a MASSIVE correction... 10,000 points is not out of the question. You know what is the question? How much will you have left after $630 TRILLION in prioritized derivative contracts take it off the top? The answer-- zero. Why on EARTH would you be exposed to loss in a rigged environment that CLEARLY moves completely different than every economic indicator? THAT answer-- because you are stupid, ignorant, greedy or all of the above. The markets will crash, bad politics will be compromised and if we're lucky, Americans will stand back up (sans the Kool Aid crowd) before our enemies realize how exposed we are. Time for change... even if it has to be crammed down the throats of nation stagnating losers and their billionaire benefactors.
Oct 3, 2013 10:51PM
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Active, been pulling some cash off the table for the bureau drawer...A little here, a little there.

Plus putting divs up like nuts for Winter..

 

Ice, even thinking about running off a couple hundred COP, to see if it drops over the next few weeks; Then go back in...

 

We would be doing much better, if not for Gold miners...

Gotta go, I'm tired.

 

Oct 4, 2013 9:33AM
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Not enough juice Jim?  These markets are already juiced to the hilt and you are saying these folks standing on the sidleines screaming for more juice should be listened to?  Markets are like the tide, they rise and fall as a normal function of what they do.  Now we are supposed to ask for immediate juice everytime someone proclaims they feel a little uneasey.  Yes I guess that is America now,  juiced all the time.  Where is the end?  How much more risk and debt until, until, until?  Until we give them more juice and then they will need to go to hospital.  Constantly being juiced is not a market in my opinion, it is more like a disease. 
Oct 3, 2013 8:16PM
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canter has been dealt a very hot hand. watch for him to raise. this will of course make the crooks on wal street even more nervous along with the crook in the W.H.
Oct 4, 2013 7:02AM
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"Do people riding this perverted wave give a damn when it crashes or do they just not care as long as their "pockets are fat"?????"

 

Once upon a time when Jim Jubak's articles were warmer and he interacted with his Comments posts, he wrote: Lessons from the Great Depression. I'd say it was his best. The comments came from all over the world and it was easy to see which were genuine. Absolutely the most illuminating read any of us could have. Very shortly, money won't be your highest level concern and grubbers won't matter. We have been ignorant enough to repeat history. God help us.

Oct 4, 2013 10:03AM
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Maybe just someone drunk or bloated on juice....Make mine Apple..

 

I drink my "Apple a Day."

Oct 3, 2013 10:41PM
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I still vote "greedy."

 

 

 

 

 

"All dem darkies is 'a moanin' 'cause 'de masser's in 'de grabe.

 

 

 

 

Oct 3, 2013 10:43PM
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the exchanges are not working. the other exchanges other than the ones on wall street. it's no secret, yet our dear leader keeps up the bluff. of course the exchanges on wall street are taking notice. how can they not? we are talking 1/6 of the economy here.
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