US: Johnson Downplays Senate Talks On Shutdown, Trump's Move Next Week Critical
Oct-30 15:11
House Speaker Mike Johnson (R-LA) has downplayed the significance of emerging bipartisan Senate talks to end the US government shutdown, telling reporters, “We welcome them doing the right thing. But again, we don't have anything to negotiate.”
- According to Laura Weiss at Punchbowl, Johnson said things will become “very dire” Saturday, which is when SNAP benefits run dry. Johnson said there’s one way out - for Dems to back the GOP’s CR. Johnson added that ACA credits don’t expire until the end of December and noted that subsidies would need reforms & income caps.
- While Johnson’s position appears outwardly unchanged, there is increasing chatter on Capitol Hill that the impending SNAP benefits cliff is accelerating bipartisan efforts to end the impasse.
- Semafor reported earlier, “rank-and-file members are talking about long-term spending bills, and urgency is increasing… Many senators have Tuesday’s elections circled — and a scheduled Nov. 10 recess could help motivate a deal after seven weeks in session.”
- Punchbowl noted, “there’s been some optimistic talk in the Capitol over the last few days, with rank-and-file senators saying they’ve restarted bipartisan negotiations over FY2026 spending bills.”
- Data from Polymarket shows a spike in the implied probability the shutdown is resolved November 4-7 (light blue line below). The key move will come from President Trump, if he decides to insert himself into negotiations next week, a deal to reopen the government could come together quickly.
Figure 1: When will the Government Shutdown End?
Source: Polymarket
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US TSYS/SUPPLY: Treasury Ups Bill Sizes To New Records
Sep-30 15:11
Treasury's bill auction sizes for this week were unexpectedly upped: 4-week by $5B to a record $105B, 8-week also by $5B to a joint-record $90B, and 4-month by $2B to a record $67B. See chart below for size history.
- Instead of raising $5B in net cash if they had been unchanged, these will raise $17B on next Tuesday Oct 7's settlement.
- Most expectations we'd seen were for bill sizes to remain relatively steady until later in October so this is coming a little early.
- While it's not clear this was the reasoning, Treasury's TGA cash position had been seen as a little weaker than had been expected in September, and likely to fall short of the $850B targeted for today's end-quarter date (was $786B as of the last Treasury statement date on Sept 26).
SOFR OPTIONS: Dec'25 SOFR Call Buy, Strangle Sale Update
Sep-30 14:55
- +15,000 SFRZ5 96.75 calls, 1.75 ref 96.31
- -12,000 SFRX5 96.12/96.62 strangles, 1.75-2.0
BOE: Breeden due to speak on monetary policy at 16:30BST
Sep-30 14:48
- Deputy Governor Sarah Breeden rarely speaks on monetary policy but her speech scheduled for today at 16:30BST at Cardiff University is provisionally entitled “The Monetary Policy Outlook”.
- This will certainly be a key speech. She sounded slightly more dovish than Governor Bailey in our view following her testimony ahead of the TSC on 3 June but hasn’t really spoken on monetary policy since.
- Her tone is likely to be pivotal for markets, particularly if she strikes a dovish tone given current market pricing.
- We think that markets are underpricing the probability of a Q4 cut with less than 1bp priced for November and less than 5bp cumulatively priced for December.
- Note that yesterday, Deputy Governor Ramsden did not rule out voting for a cut in November but was generally considered the most dovish member to not dissent at the September MPC meeting. In order to reach the five members needed for a cut we would need the two September dissenters (Dhingra and Taylor) and then likely all of Ramsden, Breeden and Bailey. That leaves the four members who hawkishly dissented in August continuing to favour a skip.
