US: Govt Shutdown Risk Continues To Tick Up Despite Emerging GOP Funding Plan
The implied probability of a US government shutdown on October 1 ticked up today, reflecting a more robust position from Democratic leadership in Congress. Despite the emergence of a GOP plan to avert a shutdown, there has been little communication between Republican and Democratic leaders, a negative signal as Senate Majority Leader John Thune (R-SD) needs at least seven Democratic votes to clear the filibuster.
- Politico reported earlier that House Appropriations Chairs Tom Cole (R-OK) and Senator Susan Collins (R-ME), “now want to pass three full-year bills ... plus a short-term continuing resolution for the nine remaining bills.”
- Democrat appropriator, Senator Patty Murray (D-WA), indicated some support but warned: “If House Republicans ... jam through a partisan CR without any input from Democratic members of Congress, and they suddenly find they don’t have the votes they need from our caucus... well then, that is a Republican shutdown.”
- Likewise, Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY) have sought to convey that any lapse of appropriations in October will be a 'Republican shutdown'.
- Senator Amy Klobuchar (D-MN) said Democrats are in a stronger position now to insist on a bipartisan funding deal than in March, when Schumer was criticised for endorsing a GOP measure: "Trump at the beginning of this year, he was 9 points up [in favorability polls]. He’s [now] 9 points under... it is a very different situation, and they know it."
Figure 1: Government Shutdown by October 1
Source: Polymarket
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FED: US TSY 52W AUCTION: NON-COMP BIDS $1.116 BLN FROM $50.000 BLN TOTAL
- US TSY 52W AUCTION: NON-COMP BIDS $1.116 BLN FROM $50.000 BLN TOTAL
SWEDEN: Weak July Services PMI Keeps An August Rate Cut Possible
This morning’s services PMI was weak, falling 5.5 points to 48.8 – the largest one month drop since April 2020. While less closely followed than the Economic Tendency Indicator, the PMI has still contributed to a 1.6bp fall in 2-year SEK swap rates today.
- Thursday’s flash July CPI report will be key in determining the likelihood of a Riksbank August rate cut. Markets currently price just a 20% implied probability of such a move, but we have noted for several weeks that a cut cannot be ruled out before seeing the inflation data, particularly with activity signals still weak.
- Although new orders (51.5 vs 59.5 prior) and production (50.1 vs 57.3 prior) PMI components remained in expansionary territory in July, the falls relative to June were sharp.
- More alarmingly, the employment component fell to a 5-year low of 37.8 (vs 36.7 prior). The downward trend is more volatile than, but still broadly consistent with, the signal from the Economic Tendency Indicator’s services employment series.
PIPELINE: Corporate Bond Update: Issuance List Expands
- Date $MM Issuer (Priced *, Launch #)
- 08/05 $500M CNA Financial WNG 10Y +125a
- 08/05 $500M Freedom Mortgage 7.75NC3
- 08/06 $500M Travel + Leisure 8NC3
- 08/05 $Benchmark MSCI 10Y +140a
- 08/05 $Benchmark Essential Utiites 10Y +130a
- 08/05 $Benchmark Macquarie Bank 11NC10 +170a
- 08/05 $Benchmark Standard Chartered 11NC10 +145a
- 08/05 $Benchmark Tennessee Valley Authority 5Y +25a
- 08/05 $Benchmark Daimler Truck 2Y +90a, +5Y +115a, +7Y +130a
- 08/06 $Benchmark PetSmart 7NC3, 8NC3 investor calls
