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US Debt Ceiling Talks

[Experienced]

Biden and McCarthy are meeting today about the debt ceiling.

Will anything come out of it?

Not very likely.  Both sides are dug in right now and both sides are likely to re-iterate their established positions as opposed to negotiating and finding some common interests upon which to build some sort of agreement.

Both sides seem prepared to take the issue to the mat so to speak and there is actually very little time left to work out an agreement.  Congress has 7 "working" days left before June 1st and worse yet Biden is leaving the country and just extended his foreign trip by adding another stop.  So he won't even be in the country for most of the remaining time before June 1st!!!

So unless Yellen pulls a rabbit out of the hat and says she has found more money and extends the date to pay bills past June1st, there is a strong possibility that we will see a Government shutdown.

While I have posted before that in some sense all this is much ado about nothing since the US will always pay the interest on its debt and Government workers will get back pay for the time off due to a shut down, rest assured that the press will be quoting chicken little that sky is falling in and the JPMs of the world will shake the tree hard so they can reload on the cheap.

The problem as I see it is that compared to previous situations where there was some sort of bipartisan
will to work something out, I see very little if any of that now.  The extremes of both Parties, while a minority,  carry enormous power and neither side wants to give in to the other.  Sadly, this could result in an unprecedented length for a shut down of Government which will make markets around the world very nervous.

Be Prepared!!

[marketsense]

Sadly its not about patriotism of your country or even common sense.  Its a juvenile schoolyard shoving match.  At the end of the day,  it will get done just before either or both of them go over the cliff in a death grip and dragging the rest of us with them. They both need to be taken out the woodshed and have their behinds soundly kicked for being so tone deaf.  No one wants

[Experienced]

Marketsense - couldn't agree more!!!

[Torontojay]

They are weaponizing politics at the expense of the US people. This kerfuffle creates fud which is exactly what they want.  It is worth noting that the 1-month treasury yield is much higher than the current Fed Funds rate. The volatility in the bond market is a clue that something very big is going on here. I think they are selling short dated t-bills to raise cash to pay the bills. 

[Obscure1]

Torontojay:  Thanks for sharing your thoughts on this.  Please contribute whenever you can as I'm sure that I'm not the only one who is interested.

[Experienced]

Great points jay.. In fact the 3 month is just under Fed funds rate which is also very scary. Couple of implications that I can think of off the top of my head... 1....Yellen is selling a lot of short dated Tresauries to build a war chest in anticipation of a long drawnout battle over the debt ceiling...along the lines that I talked about in my earlier post 2....at these risk free interest

[Torontojay]

Experienced, that is the right move to make. 100% sure about it.  Short term t-bills currently yield higher than the S&P 500 earnings yield.