Boehner "threw down the gauntlet on this debate" and the "markets will be nervous" until the issue is resolved, said Mickey Levy, chief economist at Bank of America Corp. Still, "both sides know they will not stop servicing the debt."
Philip J. Orlando, chief equity-market strategist at Federated Global Investment Management Corp., said the House speaker may not have allayed market concerns.
'Foregone Conclusion'
Still, "it's a foregone conclusion the debt limit is going up," he said.
"What I wanted to hear was there was a stronger quid pro quo" for raising it and Boehner showed the political "backbone" of someone "true to sound economic principles of trying to keep taxes low to try to stimulate the economy and bring spending in line," Orlando said.
The refusal by Republicans to consider ending what Kyl termed "so-called tax expenditures" makes it difficult to achieve agreement on large deficit cuts, said Jim Kessler, vice president for public policy at Third Way, a Washington group that describes itself as advocating "moderate policy."
If "it's a true line in the sand they've drawn, it makes it impossible to get a major deal. It's only small potatoes," Kessler said. "This may just be a negotiating position by Kyl."
In a May 7 radio interview, Kyl rejected the idea of a tax-code overhaul that eliminates a number of tax breaks.
'Off the Table'
"When you do that, somebody's taxes actually go up," he told broadcaster Larry Kudlow on New York's WABC radio. "And so the focus here is to keep taxes totally off the table."
"It's becoming increasingly clear that the political stars aren't in alignment for a large structural deal," said William Galston, an analyst at the Brookings Institution in Washington and a former policy adviser to Democratic President Bill Clinton.
Amid debate about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago. The yield on the benchmark 10-year note is below the average of 5.48 percent in 1998 through 2001, the last time the U.S. had a budget surplus, according to Bloomberg Bond Trader prices. Yields on 10-year notes increased less than one basis point, or 0.01 percentage point, to 3.16 percent at 7:33 a.m. in New York, according to Bloomberg Bond Trader prices.