US: Spkr Johnson Confirms Intent To Raise Debt Limit In Reconciliation Package
House Speaker Mike Johnson (R-LA) has told reporters, during the first Republican leadership presser since the opening of the 119th Congress, that his “intention” is to raise the federal debt limit as part of the budget reconciliation process.
- Johnson says because the GOP controls all three branches of government, the Republican Party is “in better stead” to deal with the debt limit via party-line reconciliation rather than as part of regular Congressional appropriations.
- Johnson adds: “There is a broad range of opinion in our own conference and we’re working through that… We will be having very deliberate, lengthy whiteboard sessions with all of our members…”
- Johnson says: “I want to emphasise… Republicans in this majority in the House and the Senate, our intention, and our mission, is to reduce the size and scope of government, to reduce spending in a meaningful way… Raising the debt limit is a necessary step so we don’t give the appearance that we’re going to default in some way on the nation’s debt. That’s important to the bond markets, and stability of the dollar, and all the rest, but that does not mean we will tolerate spending up to the new debt limit. The intention is to do the complete opposite.”
- The Wall Street Journal noted this morning: "Republicans have the power to raise the debt ceiling by themselves, and they will try to do that in their tax, border, energy and spending-cuts legislation... That would be the first one-party debt-limit increase since 2010."
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Our latest Employment Insight has just been published and emailed to subscribers.
