US debt crisis: US avoids default as bill becomes law

2nd August 2011

The BBC News website reports that the deal was struck after negotiations between Republicans, Democrats and the White House "went down to the wire".

The signing of the law came roughly 10 hours before Washington was due to run out of time.

Without a deal to raise the debt ceiling, the US would have been unable to meet all its bills, according to the US treasury department.

Nick Cowley, Co-Manager of the Henderon Horizon American equity fund says: "A short term package to continue the debate we'll have by partisan committees to negotiate further spending cuts and tax increases in the future and that'll be a source of continued debate in Washington. In addition, the lack of a long term solution means the credit rating agencies could downgrade the US debt rating, which is something to watch out for in the coming months as well.

"Secondly, the spending cuts that have been agreed pose some risk to the economic recovery which is in a somewhat fragile state at the moment. If you look at the reaction in themarkets so far the healthcare sector was significantly impacted… the worse performing of all the S&P sectors."

More: 

US debt: Deal set to be agreed

Are US corporate bonds a better bet than Treasuries

US debt: Obama announces deal, but Congress still needs to vote

Why the U.S. won't default on its debt

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