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In the Know – May 30, 2023

POSTED ON MAY 30, 2023    

Overseas news

US stock futures rose a bit, while Treasury futures rallied amid cautious optimism that a suitable debt ceiling deal can be reached.


Futures are contracts to buy or sell an asset at a preset price on a certain date. When futures go up, the asset is expected to get more expensive later on.


The White House and Republican congressional leaders geared up lobbying campaigns to pass the debt ceiling bill and got early endorsements from prominent moderate lawmakers before the whole Congress votes on it this week.


The debt ceiling negotiations have the attention of investors in the US and around the world. This is due to the potential economic impact of not being able to borrow past the current ceiling.


Local developments

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla sees year-on-year inflation for May to be significantly lower due to high base effects. This could ease to below 2% in January 2024 as the base effects wane.


A high base effect happens when the earlier figure is big enough to make an increase small. In such cases, the overall figure may still be large even though its increase was comparatively modest.


The National Government’s (NG) budget surplus rose to P66.8 billion in April 2023 from P4.9 billion a year ago. The highest surplus in 4 years, this was driven by the seasonal increase in tax collections.


A budget surplus is what happens when income is higher than expenses. A government could use this surplus for many purposes, including debt payment and project funding.


There isn’t a lot of movement right now, because many investors are waiting for the results of the US debt ceiling negotiations. For the moment, you may want to avoid decisions that could significantly affect your portfolio.

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