Traders turn optimistic on debt ceiling deal — and one strategist says it's a 'market opportunity'

Analysts are broadly optimistic that the woody to rise the U.S. indebtedness ceiling volition walk a divided Congress.

Their comments travel aft U.S. President Joe Biden and House Speaker Kevin McCarthy reached an statement implicit the weekend to rise the indebtedness ceiling to debar a first-ever authorities default.

In the midst of this turmoil, investors whitethorn beryllium capable to find a "market opportunity," according to Stephen Pavlick, spouse and caput of argumentation astatine Renaissance Macro Research.

Negotiators person agreed to immoderate Republican demands, specified arsenic stricter enactment requirements for low-income Americans.

The compromise besides sees the indebtedness ceiling suspended until Jan. 1, 2025, pushing it past the 2024 statesmanlike election. Spending volition besides beryllium mostly held level for 2024, but for defence and veterans, portion 2025 volition spot a 1% summation successful spending.

Even though the in-principle woody has been reached betwixt the 2 sides, it volition inactive request legislature support by some the House of Representatives and the Senate.

"I deliberation it is virtually definite that it volition beryllium passed," said Jeremy Siegal, prof of concern astatine Wharton School astatine the University of Pennsylvania. He said helium had "very small uncertainty that they weren't going to scope an agreement... this is going to beryllium a done woody and voted positively connected Wednesday."

He called the suspension of the indebtedness bounds till 2025 a "good decision," and said helium had expected it would beryllium lone delayed for a year.

"I deliberation that they decided that they wanted to spell aft the adjacent predetermination to rise that indebtedness limit, and not person different statement that could distract the American nationalist from the main issues that abstracted the country."

Still, some Republican lawmakers criticized the woody aft the announcement, portion different hardliners person threatened to descend the deal.

Pavlick predicts that McCarthy has the enactment of a "majority of Republicans" successful the House, "but that bulk tin alteration significantly."

Speaking to "Squawk Box Asia" connected Monday, Pavlick noted that astir 75 hardline Republicans volition astir apt reason the deal, pointing astatine the ultraconservative House Freedom Caucus, arsenic good arsenic hardline Democrats.

As such, with Republicans lone holding a slim bulk of 222-213 successful the house, Pavlick said helium thinks McCarthy volition person to trust connected mean Democrats to get the measure to pass.

"So it's truly going to beryllium connected President Biden to present the 75 much mean votes to marque definite it has capable to walk the House. I deliberation if it does that, past the Senate transition is astir apt assured."

To Pavlick, the woody was a "Republican victory."

"The information that determination was a dialog is, successful itself a triumph for Republicans," helium said pointing retired that Biden said that helium would not negociate astir the indebtedness bounds earlier this year, but was "forced into this."

He said the Democratic Party could person "done distant with this erstwhile they had power of Congress during the extremity of past year, 2 years ago. And they chose not to."

David Roche, president and planetary strategist for Independent Strategy saw this arsenic a "Democratic win."

He expects the woody volition walk the House with Democratic support, although, similar Pavlick, helium said right-wing Republicans volition apt ballot against it.

As the measure allows borrowing done 2024, the state volition apt beryllium capable to enactment this contented down until it comes up again successful 2025, Roche said.

Pavlick said the U.S. Treasury is going to person to "refill their coffers", and if investors are looking astatine a script wherever the Federal Reserve is going to chopped rates, "this mightiness really supply [a] marketplace opportunity," helium said.

Pavlick suggests investors could look astatine buying Treasury bonds to "lock successful immoderate of those higher yields."

Separately, Siegal pointed retired that U.S. futures pointed to flimsy gains, and said it's due to the fact that a apt woody "does wide a small spot of uncertainty."

However, the main interest up for investors volition beryllium the "tremendous tightening" that the Federal Reserve has done, Siegal warned.

"The slope problems, that volition not pb to a situation of slope deposits but tightening of lending standards, peculiarly for small- and mid-sized companies. And I americium acrophobic astir the 2nd fractional of the twelvemonth and perchance what we mightiness spot is present is simply a absorption connected those problems."