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Debt-Ceiling Anxiety Returns To T-Bill Market, USA Risk Rises

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by Tyler Durden
Monday, Nov 29, 2021 - 12:50 PM

Once again, markets are quietly pricing in less than smooth resolutions to the outstanding fiscal and debt ceiling questions facing Washington in the all-too-imminent future.

Treasury Secretary Janet Yellen said last week that the US can only continue to pay its bills until December 15, and that has renewed anxiety in the shortest-end of the Treasury Bill market as the 'kink' is back...

Bloomberg reports that lawmakers face a Friday deadline to pass a stopgap funding bill to keep the federal government open. House Democrats are considering proposing a fresh stopgap spending measure that would keep the federal government funded through mid-to-late January, according to a person familiar with the matter.

"Our base case continues to be that the Treasury would exhaust its fiscal resources in the first half of January in the absence of Congressional action," wrote Wrightson ICAP’s chief economist Lou Crandall.

"If Congress does not increase the debt ceiling by the end of December, it is highly probable that the Treasury would have enough leeway to settle the year-end coupon auctions anyway. However, that might require it to use some of its surplus cash to pay down more bills before December 31 than our auction calendar currently assumes."

House Appropriations Chair Rosa DeLauro (D-Conn.) told reporters recently that she would like a short-term continuing resolution that would set up another deadline later in December, which would keep the pressure on lawmakers to negotiate a full-year funding package.

For now, USA Sovereign risk is starting to rise once again, well above the pre-anxiety levels of the summer...

The usual suspects are spewing the usual semantics...

"We cannot let the full faith and credit of the United States lapse and we are focused on getting this done in a bipartisan way," Senate Majority Leader Chuck Schumer said in a press conference.

At around the same time, McConnell said Congress would "figure out how to avoid default," adding "we always do."

McConnell has said he won't offer Democrats the same deal he gave in October. Sen. Ted Cruz told Insider he doesn't have any plans to join Democrats in raising the limit, and Sen. Lindsey Graham said Republicans are "still talking about it."

That leaves Democrats with just one realistic option. The party could lift the ceiling through the reconciliation process, which lets Senate Democrats approve legislation with a simple 50-vote majority.

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