Chicago Mercantile Exchange (CME) Group Executive Chairman Terry Duffy spoke with FBN’s Liz Claman about the S&P downgrade of the US credit rating. Duffy said today is “not a record day” in terms of trade volume and that, “I think we should be rated at triple-A plus… I am a little surprised by this downgrade.” He also said our government is “by far the best government in the world” and the S&P “should give us an uptick in the rating, not a downtick.” Excerpts from the interview can be found below, courtesy of Fox Business Network.
On whether today is a record day for trading:
“So far it’s not a record day, we’ve done a little over 19 million contracts, that’s on an estimated basis. We did 23.5 million on Friday so we have not hit a record amount of volume, but we are having a very heavy volume day today. I think what’s interesting is you look at the volume, and the price movement and the treasury complex and look at the two’s, five’s and ten-year’s and those prices are going up, which means there’s a demand for the treasuries and the yields are coming down, which means even though there’s a downgrade for the US government, people are still flocking to the US treasury complex. It’s like if you were running a business right now and you’re basically saying to the business, listen I will give you nothing and you take my debt, I think we should be rated at triple-A plus. I am a little surprised by this downgrade to be honest.”
On whether the S&P’s decision is based on politics:
“It makes me laugh because I spent a lot of time in Washington so I know the process fairly well. That process is a kangaroo court at best most of the time for a casual observer, but if you really understand politics and our government, it is by far the best government in the world and they go back and forth that’s what a democracy does for you. People elect different politicians in order to voice their opinions and I think that’s exactly what we saw, so for S&P to downgrade off of what they think are the political wills going forward, to me is a joke. You look at the 78 times, or whatever it’s been since the Kennedy administration, that we have raised the debt ceiling, not one time have we had cost cutting measures associated with it. They should give us an uptick in the rating, not a downtick.”
On whether he disagrees with the S&P downgrade:
“If the treasury market was going the other way, and I was seeing different things, I would say absolutely, but we actually got cost cutting measures to take down the deficit in this new debt ceiling deal and I think that’s unprecedented and I think S&P should have given that a greater weight, rather than they’re concerned about how people would get along in Washington, DC. There will always be bickering in Washington DC. It goes back to our first president; it will continue forever.”
On whether there’s any specific metric he’s looking to today:
“You have to look at the oil markets. It’s nothing more than a reflection of the equity markets. People perceived it to be less money in the system which means less demand for oil. That’s interesting. The gold market, which is still continuing to rise. Gold should be a lot higher than it is, but it’s not, so I take that as a couple good signs. We are just going through the ebbs and flows of the marketplace and we live in a different world today. It’s much more volatile from a political standpoint, geopolitical and from a markets perspective and I don’t see anything different happening.”
On whether he agrees with some of the regulations the administration has installed:
“I’m very disappointed that the new regulation hasn’t taken hold and the rules have not been put in place. The problem is they wrote a 2300 page document, which nobody really understood they didn’t understand how they’d implement the rules, hence there was no way they could make the deadlines. That creates more uncertainty for the marketplace, how we are gonna do the business. I find that as a fault of the government for not really understanding what kind of legislation they were passing.”
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