Commodities and the US debt crisis. What will the week bring?

The week on the markets begins with the relief that investors felt after the news of the agreement on the US debt limit. Joe Biden announced Sunday that he had reached a consensus in talks with House Speaker Kevin McCarthy. A vote to freeze the debt limit until January 2025 is scheduled for Wednesday.

What does this mean for the markets? 

The US Department of the Treasury, headed by the former president Fed Janet Yellen, announced on Friday that failure to reach an agreement on raising the debt limit will result in the insolvency of the United States on June 5 this year. Now, the Treasury Department's main account has been drained to almost nothing, with just $60 billion left at the end of last week. Such an amount would not even be enough to pay off half of the bonds maturing on June 1. And it should be remembered that part of the American debt also matures today, tomorrow or the day after tomorrow.

More than $3 trillion worth of bonds mature in the coming months. This means that a similar amount may simply disappear from the market. And liquidity – especially excess liquidity – is crucial to US equity markets. Since the beginning of the year, it has been increased by spending from the account of the Treasury Department, but this situation may change in the following months.

The correlation of excessive liquidity in the banking sector and the valuation of American indices is considerable. The massive issuance of US debt, together with the operations of limiting the Fed's balance sheet, may cause excess liquidity to melt down to pre-pandemic levels. And that could have a negative impact on the stock market. Is it a good time to buy US bonds? What next for the price of gold, oil or natural gas?

We invite you to meet the economist XTB Michał Stajniak, in which he will focus on the key topic of this week, i.e. the US debt.

In today's video:

• What does the US limit agreement assume?
• High profitability - is it an opportunity?
• What next for raw material prices?

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In addition, due to the very dynamic situation in the world, additional ones will be made available raports Video on the impact of war, pandemic and economic crisis on the global economy.

About the host

Michał Stajniak

Michał Stajniak - Raw Material Market Analyst in XTB. It places particular emphasis on the linkages between the behavior of commodity prices and the currencies of economies heavily dependent on exports of commodities such as oil, iron ore, gold and powdered milk. He is the author of frequent comments comparing commodity price indices with currency pairs such as AUDUSD, NZDUSD, USDCAD, USDNOK, or EURNOK. He represents XTB in the media (including TVN24 BIS, Polsat News, TVP Info, Bankier TV or Onet TV) and is the author of articles in the financial press such as Parkiet, Puls Biznesu and Dziennik Gazeta Prawna. He is a practitioner of the stock market and the derivative market. In his approach, he values ​​fundamental analysis above all, but often uses Fibonacci levels to determine the demand and supply zones needed in a Price Action strategy. A graduate of Quantitative Methods in Economics and Information Systems at the Warsaw School of Economics.

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