While the Shutdown circus continues , notice what doesn't stop !
http://www.zerohedge.com/news/2013-09-30/government-may-shut-down-these-18-october-pomos-will-proceed-come-hell-or-selective-
The Government May Shut Down, But These 18 October POMOs Will Proceed Come Hell Or Selective Default
As pointed out earlier, the Federal Reserve does not depend on Congressional appropriations, and will not see any cutbacks due to a shutdown which with every passing hour seems more inevitable. It also means that even if the entire US government were to be shutdown, the daily wealth effect injection into the stock market for the benefit of the 0.01% will continue and the confidence show must go on. Specifically, as was released moments ago by the NY Fed, Bernanke will inject another $45 billion in the capital markets courtesy of 18 distinct bond-monetizing POMO operations over the next 31 days. These will take place regardless of anything else that may happen to the government, which perhaps better than anything else, shows who is truly in control of this country and on whose behalf they operate.
Source: NY Fed
Fed withdrawing liquidity in a massive way ahead of the shutdown ?
http://www.zerohedge.com/news/2013-09-30/fed-withdraws-whopping-58-billion-liquidity-latest-reverse-repo-test
Fed Withdraws Whopping $58 Billion In Liquidity In Latest Reverse Repo Test
It appears there is just a little excess liquidity sloshing around out there. Moments ago the Fed announced that as part of its most recent overnight reverse repo "liquidity withdrawal preparedness test", some 87 entities provided the Fed with a whopping $58.2 billion in overnight liquidity in exchange for Treasury collateral at a 0.01% stop out rate. This was the largest amount in liquidity soaked up (or, alternatively, collateral provided) by the Fed in its recent history of Temporary Open Market operations going back to 2012.
http://www.zerohedge.com/news/2013-09-30/senate-kills-latest-house-cr-proposal
Senate Kills Latest House CR Proposal
They came, they voted, and they killed the latest, third, Continuing Resolution amendment just passed minutes ago by the House.
What happens next: either nothing and the US government shuts down in two and a half hours, or the farce can repeat for the fourth time and when the House gets the tabled CR back from Senate, House Republicans could hold a conference, go to Rules, and put a new Continuing Resolution on the floor later tonight. Which, however, unless it is "clean" will be voted down again.
http://www.zerohedge.com/news/2013-09-30/senate-kills-house-bill-what-happens-next
Senate Kills House Bill: What Happens Next
Now that the Senate has killed the latest proposal passed by the House, and with Harry Reid making it clear he is not interested in a one week Continuing Resolution stopgap, Bloomberg reports that the House will take the tabled bill and make these two changes to it:
- HOUSE PLAN SAID TO DELAY INDIVIDUAL MANDATE OF HEALTH CARE LAW
- HOUSE PLAN SAID TO CUT HEALTH SUBSIDIES FOR LAWMAKERS, STAFF; U.S. HOUSE WILL TRY TO PASS NEW EMERGENCY FUNDING BILL REQUIRING OBAMA
AND ADMINISTRATION OFFICIALS TO SIGN UP FOR OBAMACARE-REP. ISSA
And, as expected, if and when this iteration of the dead-end bill passes, the Senate will kill it again. So unless there is a dramatic change in strategy by either party, the government shutdown in just over 9 hours (however brief or not so brief) seems inevitable.
* * *
Update: and just to seal the deal, Reid literally adds insult to injury: REID CALLS HOUSE REPUBLICANS `ANARCHISTS'
http://www.zerohedge.com/news/2013-09-30/t-minus-155-hours-complete-government-shutdown-summary
T-Minus 15.5 Hours: The Complete Government Shutdown Summary
- Barack Obama
- CSC
- Debt Ceiling
- default
- Gross Domestic Product
- Market Sentiment
- Monsanto
- Morgan Stanley
- Obamacare
- President Obama
- RANSquawk
- Volatility
- White House
Presenting the full summary about the only event the market is focused on today.
MAIN POINTS:
Today sees the Senate reconvene after yesterday saw the Republican-led House voted in favor of a modified continuing resolution (CR) which includes a one-year delay to Obamacare (the Affordable Care Act).The Senate is not scheduled to meet until 1400ET today meaning that if the new bill is rejected there is not enough time to create a new CR and pass it back to the Senate before the midnight deadline, leading to a government shutdown in which all non-essential government workers will stay at home. Expectations are now that it is likely there will be a temporary shutdown given that the White House signalled the new CR would be vetoed by President Barack Obama and Democrats in the Senate immediately said the legislation approved by the House yesterday is unacceptable.
Even if there is a government shutdown, it is expected to only last a day or two and a CR is expected to pass in Congress this week, however this shutdown could lead to a delay of Friday's release of this month's Non-Farm Payroll report. This will fund the government to at least November 15th, giving more time for Congress to create a CR which extends through the entire 2014 fiscal year. Goldmans estimate a 2-day US govt shutdown will hit Q4 GDP (annualised) by 0.1 percentage points and one week by 0.3 percentage points, however the more important issue for Congress to address will be the debt ceiling as the US is expected to exhaust borrowing capacity on October 17th.
One main concern of a delay to both a 2014 budget and raising the debt ceiling is the possibility of a credit rating downgrade of the US sovereign, although overnight Moody's said that a government shutdown wouldn't affect debt service and that a debt cap failure would lead to perceived default risk and that failure to raise the debt limit is worse than a shutdown.
It is worth bearing in mind that several members of Congress are likely to speak to the press throughout today as they arrive for discussions and the Senate vote, and as is often the case, any deal between the Senate and House is likely to be either overnight or within the next two days. Although a US government shutdown is a risk event for financial markets, many analysts have noted this week's voting is overshadowed by debt ceiling negotiations which will begin shortly after. These talks will have a much greater impact on market sentiment as a delay to increasing borrowing capacity risks a US default as the worst case scenario.
EVENTS OVER THE WEEKEND:
- Shutdown seen as unavoidable without talks
- U.S. 4Q GDP seen reduced by as much as 1.4 percentage pts. depending on shutdown’s duration
- Latest House plan authorizes 10 wks of spending starting Oct.1 only if most provisions of Obama health law delayed a year
- Senate Democrats, President Obama say they will reject any measure that includes provisions tied to Obamacare
- Yday, Senate Majority leader Harry Reid D-Nev. says chamber has acted on Continuing Resolution, adjourns until today 2pm
- Govt shutdown odds now at 90%, Democrat Collender says
ECONOMY:
- In case of govt shutdown, Labor Dept says it will issue jobless claims data (scheduled Thursday 8:30am)
- SEC says EDGAR system, crucial enforcement will continue
- Treasury says it will operate debt programs and manage cash, USPTO says it will stay open “a few weeks”
- Commerce Dept says it won’t issue economic data
- Bearish impact on U.S. economy “significant” if shutdown lasts, Morgan Stanley says in note
- Shutdown means Fed will have to prolong QE: BNP Paribas
CONTRACTORS:
- "Notable" cos. tied to potential continuing resolution moves; H.J. Res. 59 would fund govt at “close to current levels” according to Sept. 27 note from Bloomberg Industries analyst Brian Friel: BLL, BAVA@DC, BA, CACI, ERICB@SS, XLS, GD, GSK@LN, HRS, LMT, NOC, NOVN@VX, RTN, SAN@FP, TTEK, URS
- Top 20 tied to defense, healthcare, infrastructure, IT:LMT, BA, GD, RTN, NOC, UTX SAIC, BA/@LN, LLL, HII, MCK, Bechtel (2213Z@US), BAH, URS, CSC, DYN, HUM, HNT, Triwest Healthcare (1893Q@US), TXT/BA joint venture
- Health Exchanges begin enrollment tomorrow there’s a partial shutdown of govt.
- Fannie, Freddie don’t face direct shutdown effect: Moody’s
- Senate bill ends protection Sept. 30 for Monsanto, Dupont on bioengineered seeds: BI’s Friel
- USD begins week buffeted by increasing possibility of U.S. government shutdown
TRADING RECOMMENDATIONS BASED ON DEBT SHUTDOWN CATALYST:
Barclays
- Go long USD/CAD 2w2w FVA; relatively low USD/CAD volatility and its exposure to U.S. economic outlook make this an attractive hedge against U.S. political risk from debt-ceiling negotiations and a potential spike in market volatility
Credit Agricole CIB
- Risk aversion is rising, U.S. equities and USD are falling
- Near-term prospects for USD are bleak, with limited potential for any upside unless budget deal is reached; safe-haven currencies, in particular JPY, will be buoyed in this environment
- In terms of high-beta currencies including Asian currencies, any positive impact from the fact that U.S. yields are capped will be outweighed by rising risk aversion leaving most Asian currencies vulnerable
Bank of Tokyo-Mitsubishi UFJ
- If no resolution is reached, partial govt shutdown will kick in on Oct. 1, which could prompt USD selling against majors although stronger against Asia
- Beyond govt shutdown, bigger issue is how they move toward debt limit when govt runs out of cash on Oct. 17; under such circumstances, BOT-Mitsubishi UFJ’s one-week USD/JPY forecast is a wider 96.50-100.00 on safe-haven JPY bids
Westpac
- Expects USD to continue to trade on the “backfoot” vs its peer core currencies during a govt shutdown; event risk early in the week is negative for USD
- Failure to raise debt ceiling would mean the U.S. govt must pay all its bills out of current revenue, risking default and downgrade and probable chaos in markets
Source: RanSquawk, Bloomberg
I might just have to have a rare weekday drink tonight to celebrate the government shutdown, even picked up a bottle of absinthe today as it seemed appropriate for the times. Of course I don't know if I'm really ready for all the possible ill effects but what the hell.
ReplyDeleteI'm not sure about that guys plan to save the Euro, still sounded like a technocrat solution to me. I'm more of a Austrian guy/ Libertarian type so I think I would prefer some radically different solutions but I'm not in charge.
Evening Kev - regarding the shutdown , it's interesting to note how much waste and excess is demonstrated ..... hordes of Federal Employees will be furloughed as of Midnight , yet the essential functions of Government will continue ! When will someone ask - why then do we employ all of these hordes of redundant or simply non essential folks - especially when our country is de facto broke ?
ReplyDeleteI think we shall see the GOP / Dem clown show for a few days - I would be shocked to wake up Monday morning and not see a continuing resolution in place ! The problem of course is once the shutdown starts , someone has to " give in " and take the blame for the shutdown having occurred - which could result in the clown how having a more extended run on Pennsylvania Avenue ! Of course there is also the debt ceiling clown show , which could overlap with the current clown show !
My thought on Yanis's plan is that what Europe has tried up to this point is just more extend and pretend . As a result , problems have gotten worse as ever more debt has been taken on by insolvent banks backed by insolvent countries - the ECB plan hasn't worked and at some point it will result in an incredible implosion. 2008 will be a walk in the park by comparison ! Same thing applies here in the US - but next time , how will the Fed and ECB dig themselves out of the hole ( without imposing massive controls on the sheeple , de facto financial martial law ? ) I don't think we have all that long to wait - the shitte appears ready to hit the fan sometime between the usual end of the year tensions and 6/14 !
With a possibility of another government shutdown due to lack of unity, I guess it is wise if people will acquire an income insurance for extra protection.
ReplyDelete