Senate Leaders Resume Fiscal Talks as House Scraps Vote
U.S. Senate leaders are rushing to lock up an agreement to end the fiscal impasse, stepping in after House Republicans’ last-minute plan to avert a U.S. government default collapsed.
The emerging Senate accord may be announced as early as this morning, though passage in the Republican-led House is far from assured and one ratings company yesterday placed the U.S.’s AAA credit rating on a negative watch.
Senate Majority Leader Harry Reid arrives at the United States Capitol in Washington, D.C., on Tuesday, Oct. 15. Photographer: Pete Marovich/Bloomberg
Oct. 16 (Bloomberg) -- Andrew Bosomworth, managing director at Pacific Investment Management Co., talks about the U.S. government shutdown, debt ceiling debate and its impact on Treasuries. He speaks from Munich with Anna Edwards and Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Oct. 15 (Bloomberg) -- House Minority Leader Nancy Pelosi, a Democrat from California, talks about the outlook for an agreement avoiding a U.S. debt default and ending the partial government shutdown, following a meeting between House Democrats and President Barack Obama. House Minority Whip Steny Hoyer also speaks. (Source: Bloomberg)
Oct. 15 (Bloomberg) -- Senate Majority Leader Harry Reid, a Democrat from Nevada, speaks on the Senate floor about the plan put forward by Republicans in the House of Representatives that would end the partial government shutdown and raise the U.S. debt limit. Senator Dick Durbin, a Democrat from Illinois, also speaks. (Source: Bloomberg)
Oct. 15 (Bloomberg) -- U.S. House Speaker John Boehner and Majority Leader Eric Cantor speak about the partial government shutdown and negotiations over the debt ceiling. Republican Representatives Kevin McCarthy of California and Cathy McMorris Rodgers of Washington also speak at a news conference in Washington. (Source: Bloomberg)
Oct. 16 (Bloomberg) -- Robert Carnell, chief international economist at ING Bank NV, talks about the failure of U.S. government to raise its debt limit as the Treasury's deadline looms. He speaks with Francine Lacqua on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Oct. 16 (Bloomberg) -- U.S. Senate leaders are rushing to lock up an agreement to end the fiscal impasse, stepping in after House Republicans’ last-minute plan to avert a U.S. government default collapsed. Peter Cook reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)
Senate Minority Leader Mitch McConnell, left, arrives at the United States Capitol in Washington, D.C., on Tuesday, Oct. 15. Photographer: Pete Marovich/Bloomberg
The framework being negotiated by Senate Majority LeaderHarry Reid and Minority Leader Mitch McConnell presents the clearest path to ending the 16-day-old government shutdown and extending U.S. borrowing authority, which lapses tomorrow. It would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7.
“Senator Reid and Senator McConnell have re-engaged in negotiations and are optimistic that an agreement is within reach,” Adam Jentleson, Reid’s spokesman, said in a statement last night.
Whether the U.S. misses promised payments, including benefits, salaries or interest, may depend on two Republican lawmakers.
In the Senate, Texas Republican Ted Cruz, who has led a campaign against President Barack Obama’s signature health-care law, has left open the possibility of delaying the debt-ceiling measure. If any of the 100 senators chose to delay it, a vote could be pushed to as late as next week.
Boehner Decision
In the House, Representative John Boehner of Ohio will face one of the most important decisions of his tenure as speaker: whether to allow a Senate agreement to come to the House floor unimpeded, or try to amend it. Democrats say they could pass a Senate deal in the House, with a handful of Republicans, if Boehner would allow a vote.
A Senate accord on government funding and the debt ceiling will probably be presented for a House vote by Boehner and likely win passage with a majority of Democrats and minority of Republicans, Representative Charles Dent, a Pennsylvania Republican, said last night in an interview on CNN.
Reid, a Nevada Democrat, and McConnell, a Kentucky Republican, temporarily suspended talks yesterday while Boehner tried and failed to marshal House Republicans behind a plan that was significantly scaled-down from demands for health-law changes that led to the U.S. government shutdown last month.
The partial shutdown has closed national parks, slowed clinical drug trials and led to the furloughs of thousands of federal workers.
Fitch Statement
Fitch Ratings yesterday put the U.S. AAA credit grade on ratings watch negative, citing the government’s inability to raise the debt ceiling in a timely manner, according to a statement after markets in New York closed.
U.S. one-month bill rates rose to the highest level since 2008 as investors prepared to bid for $68 billion of short-term debt today after three- and six-month auctions yesterday drew the weakest demand in four years.
Rates on bills maturing on Oct. 24 climbed to the highest since they were issued in April on concern the Treasury Department will have to delay repaying some of its maturing securities as lawmakers battle over raising the federal borrowing limit. According to data compiled by Bloomberg, one-month rates were 0.33 percent at 7:07 a.m. in New York after touching 0.37 percent, the most since October 2008. The benchmark 10-year yield was little changed at 2.73 percent, according to Bloomberg Bond Trader data.
Futures Contracts
Standard & Poor’s 500 Index futures expiring in December rose 0.4 percent to 1,698.7 at 7:27 a.m. in New York. The benchmark gauge slid 0.7 percent yesterday after rallying 3.3 percent over the previous four days. Contracts on the Dow Jones Industrial Average gained 65 points, or 0.4 percent, to 15,160.
“If the market truly believed the U.S. will default on its obligations, we would see a more dramatic reaction from equity and bond markets,” Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Wealth & Investment Management in London, said by phone today. “The great expectation is the deal will be done. If the deal is not done, however minuscule that chance that may be, it would have a devastating impact on sentiment.”
Interviewed today on “CBS This Morning,” John Chambers, a managing director of sovereign ratings at Standard & Poor’s, said he estimated that every week of the shutdown would cut 0.3 percent of U.S. gross domestic product from the fourth-quarter output.
“If we go past the point where the government can’t borrow any more, one of two things could happen,” he said -- cutting spending other than debt service, which “would certainly put the U.S. economy in a recession,” or not paying interest or debt service, “which would probably be an event that would be much worse” than the collapse of Lehman Brothers in 2008.
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