Rates, FX Trading Still Calm as U.S., Italian Debt Levels Rise

Rates, FX Trading Still Calm as U.S., Italian Debt Levels Rise

By Erik Norland, Senior Economist, CME Group

How Will Rising Rates Impact a Growing Budget Deficit?

Highlights

  • Why is the budget deficit expanding during growth, low unemployment?
  • Could rising rates widen the deficit, now at 4.5% of GDP vs. 2.2% in 2016?
  • Treasury options appear unconcerned, trading near record lows
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Is the Euro’s Fate in Italy’s Hands?

Highlights

  • Precarious Italian government debt market driving euro-U.S. dollar rate swings
  • How will euro respond if Italy cuts taxes, increases government spending?
  • Will European Central Bank rescue Italy if it spirals into a financial crisis?
  • Euro-U.S. dollar options prices near record low, but could see volatility spike
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