US: Govt Shutdown Risk Recedes Slightly But White House Position Remains Unclear
The implied probability of a government shutdown on October 1 receded slightly after appropriators huddled yesterday for a bipartisan and bicameral meeting to discuss the funding deadline.
- House Democratic appropriator Rosa DeLauro (D-CT) said, “Everybody is very cognizant of the deadline.” House Majority Leader Steve Scalise (R-LA) said House leadership may let bipartisan talks go further than March, when Democrats swallowed a partisan funding extension: “We want to give [Republican appropriator Tom Cole] the latitude to get the agreement first...”
- Senate Majority Leader John Thune (R-SD) said he expects the House to sign off on a “fairly clean” stopgap measure to punt funding into November or December.
- The Hill notes Thune and House Speaker Mike Johnson (R-LA), "have gotten the message that Democrats will only accept a clean continuing resolution, without major policy riders or significant spending cuts..."
- However, President Donald Trump’s position remains unclear. Punchbowl notes that, “Top Republicans recall that Trump oversaw the longest government shutdown in U.S. history back in 2018-19,” and his OMB Director, Russell Vought, may see a showdown with Democrats as another route to coopting the pursestrings from Congress.
- Republicans may also overestimate Democrats’ willingness to accept a ‘clean’ CR, especially considering they have framed a potential lapse in appropriations as a ‘Republican shutdown’. Senator Mark Warner (D-VA) told reporters: “How do you say ‘clean CR,’ then Russ Vought gets to pick and choose?”
Figure 1: Government Shutdown by October 1 
Source: Polymarket
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
