Is the risk of a US default pushing down asset prices? Not equities, probably on account of strong liquidity flows, although it may be preventing a stronger rally. But eurodollar futures and gold seem to be reflecting the risk. Following the raising of the debt ceiling, expectations for US interest rates could well rise (as the tail risk falls out of the market). Also, pessimism about the economy seems to be running high — I am not optimistic, but there may be some kind of rebound in the second half of the year — which has also pushed down the rates implied by interest-rate futures. Once the debt ceiling is raised, it might make sense to be short Eurodollar futures.

The chart below shows the interest rates implied by interest-rate futures, with US LIBOR on the top row (June 2012, 2013 and 2014) and EURIBOR on the bottom row.

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