The U.S. government issued a staggering $23 trillion in Treasury bonds in 2023, with nearly $7 trillion issued in just 3 months, putting the debt-to-GDP ratio near record highs of over 120% as spending reached World War II levels. This was driven by skyrocketing interest expenses and continued high levels of government spending. Concerns were raised about the unsustainability of the fiscal path, with the Congressional Budget Office projecting the debt-to-GDP ratio reaching 130.6% by 2034, a level at which 51 out of 52 countries have historically defaulted. Through last-minute contentious negotiations, Congress narrowly averted a government shutdown by passing the $1.2 trillion spending bill, though the House Speaker faced a revolt from hardline Republicans over a lack of stronger border security provisions.
EQUITY
The major U.S. index opened lower, with investors adopting a cautious approach on Monday, as they braced for the upcoming PCE inflation data release later this week. The holiday-shortened week and lack of major earnings reports may see a relatively quiet trading session. However, South Korean tech stocks rose, driven by the high demand for advanced memory chips used in AI applications, which lifted SK Hynix's shares higher.
GOLD
Gold prices remained steady around $2,170 per ounce as Fed Governor Lisa Cook cautioned about proceeding carefully with rate cuts, while Chicago Fed President Austan Goolsbee pointed to three rate cuts for this year. A lower PCE reading could confirm cuts and further boost gold's appeal, in addition to external pressure mounting on the greenback. Technical reading suggests the price is at the end of consolidation, expecting to break higher.
OIL
Oil prices are slightly lower even under supply constraints, driven by Russian production cuts and a surge in Indian imports of U.S. crude oil, reaching over 250,000 barrels per day. Approximately 7.6 million barrels of oil are en route to India, as the country seeks to diversify its oil sources in reaction to stricter U.S. sanctions on Russian crude. However, the UN's endorsement of a ceasefire between Israel and Hamas may limit further gains.
CURRENCY
The dollar was under pressure as the yen gained some strength due to Japanese officials' verbal interventions. All eyes are on the upcoming U.S. core PCE price index release, which could guide the Fed's interest rate path. SWIFT, the global bank messaging network, is developing a platform to integrate central bank digital currencies (CBDCs) with the current financial system within the next 1-2 years.
