U.S. debt still attractive to international investors

The rest of the world still trusts Uncle Sam to make good on his word.

Bitter and so-far fruitless debate in Washington about America’s looming borrowing limit has raised the prospect that in 14 days the United States will default on its enormous debt for the first time in history.

But foreign investors don’t seem too concerned. They bought $38 billion in U.S. government debt in May, increasing their holdings 0.6 percent to $4.51 trillion, the Treasury Department said Monday.

Foreign investors’ love of U.S. debt isn’t as blind as it might seem, though. Investors expect lawmakers to raise the borrowing limit to avoid a potential global financial crisis. They also expect that the federal government would choose to cut spending if lawmakers can’t agree on new spending limits, rather than withhold interest payments to bondholders.

IBM raises guidance, beats estimates on Wall Street

IBM Corp. raised its income guidance for the year on Monday as earnings in the latest quarter increased 8 percent because of growth in all three of its major product categories.

The results show the strength of the 100-year-old company’s efforts to link its mainframes and other computing hardware with its newer businesses, software and services. Those two categories bring in the bulk of IBM’s income.

Net income was $3.66 billion, or $3 per share, in the second quarter compared with $3.39 billion, or $2.61 per share, a year ago. Excluding special items, IBM earned $3.09 per share. Analysts expected $3.02 per share.

Borders seeks approval to liquidate all 399 stores

Borders Group is seeking court approval to liquidate its 399 stores after it failed to receive any bids that would keep the 40-year-old chain in operation and it canceled an auction process.

Liquidation sales could start as soon as Friday. The U.S. Bankruptcy Court of the Southern District of New York is set to approve the move on Thursday.

Borders was looking for a new white-knight bidder after a $215 million bid by private-equity firm Najafi Cos. dissolved late last week. Creditors and lenders argued the chain would be worth more if it liquidated immediately.

Cisco Systems to lay off 6,500 workers worldwide

Networking equipment maker Cisco Systems Inc. is cutting 6,500 employees – about 9 percent of its work force – as it follows up on a plan announced in May to eliminate thousands of jobs to reduce costs and raise profits.

Cisco, which has about 73,400 employees worldwide, said Monday that it will lay off 4,400 people. Another 2,100 employees chose to leave as part of an early-retirement program. The company said the cuts include the elimination of 15 percent of its positions at and above the level of vice president.

Cisco said the cuts will cost it $1.3 billion in severance and termination benefits. The company plans to take the charge over several quarters.

Cost of buying a small car to dip this fall, Kelley says

Small car prices, which have hit record highs this year, are expected to come down this fall.

Lower gas prices will make people comfortable driving something bigger. Honda and Toyota, which were hurt by the Japan earthquake, will crank up production of small cars. And Japan and Detroit will offer big discounts on smaller models as their lots fill up.

The average new compact car, which cost a record $20,500 in June, should fall to about $19,300 by the end of the year. And the average used compact car should fall from a record $11,300 to about $9,600 over the same time, according to the Kelley Blue Book auto pricing service.