Partial shut down

And the days ahead

October 17th through October 20th we will have another delay or a resolution will be made or we default.

According to Bloomberg below:

Partial Shutdown http://www.bloomberg.com/news/2013-10-02/treasury-uses-final-measures-to-avoid-breaching-debt-limit-1-.html

The U.S. government is already limited in action after Republicans and Democrats in Congress failed to agree on funding for the new fiscal year that began yesterday. That led to a partial shutdown of the government at midnight, forcing about 800,000 federal workers off the job. The shutdown could cost the economy as much as $10 billion a week, the White House said on its website.
The Standard & Poor’s 500 Index rose 0.8 percent to 1,695.00 in New York yesterday as investors speculated that the economic effects of the first partial government shutdown in 17 years would be limited.
The so-called extraordinary measures used by the Treasury are accounting maneuvers allowing the government to avoid breaching the $16.7 trillion debt ceiling. They include allowing the government to enter into a debt swap with the Federal Financing Bank and the Civil Service Retirement and Disability Fund.
To contact the reporter on this story: Kasia Klimasinska in Washington at kklimasinska@bloomberg.net

The U.S. has started using final extraordinary measures to avoid a breach of the nation’s debt limit, Treasury Secretary Jacob J. Lew said as he pressed Congress to increase borrowing authority “immediately.”
Lew, in a letter addressed to House Speaker John Boehner dated yesterday, repeated that the measures will be exhausted no later than Oct. 17.
When that happens, “we will be left to meet our country’s commitments at that time with only approximately $30 billion,” he said, “far short of net expenditures on certain days, which can be as high as $60 billion.”
Lew and President Barack Obama have said they won’t negotiate on the limit, which is tied to obligations the U.S. has already incurred. Boehner, an Ohio Republican, has issued a list of demands before he’ll support raising the ceiling. His conditions include approval of TransCanada Corp. (TRP)’s Keystone XL pipeline, major revisions to the tax code and a one-year delay of the insurance mandate in the Obama health-care law.
Pacific Investment Management Co.’s Bill Gross said the U.S. will avoid a “catastrophic” default on Treasury securities.

‘Global Complex’

“The U.S. Treasury is the center of the global financial complex,” Gross, manager of the world’s biggest bond fund, said during a Bloomberg Television interview with Trish Regan and Adam Johnson. A default would be “unimaginable,” as it would have “catastrophic” consequences on U.S. borrowing costs, and would trigger a “complex series of events worldwide” that would ripple through global financial markets, he said.
Benchmark 10-year yields fell two basis points, or 0.02 percentage point, to 2.63 percent at 9:16 a.m. London time, according to Bloomberg Bond Trader prices. The 2.5 percent note due in August 2023 rose 7/32, or $2.19 per $1,000 face amount, to 98 29/32. The yield dropped to 2.59 percent on Sept. 30, the lowest level since Aug. 12.
The U.S. budget deficit in June was 4.3 percent of gross domestic product, down from 10.1 percent in February 2010 and the narrowest since November 2008, when Barack Obama was elected to his first term, according to data compiled by Bloomberg from the Treasury Department and the Bureau of Economic Analysis.
For the first 11 months of the fiscal year 2013, which ended Sept. 30, the deficit was $755.3 billion, the narrowest for that period in five years, the Treasury said on Sept. 12.

Dollar Slides as U.S. Shutdown Boosts Fed QE Bets

By John Detrixhe & Lukanyo Mnyanda - Oct 1, 2013 4:10 PM CT             

              

The dollar traded at almost the lowest since February as a partial shutdown of the U.S. government boosted speculation the Federal Reserve will persevere with asset purchases that tend to weaken the currency.
The euro touched its highest level against the greenback in almost eight months as political wrangling threatened to curb U.S. growth. Lawmakers still need to agree on raising the U.S. debt limit to avoid a default after Oct. 17. The yen rose as Japanese Prime Minister Shinzo Abe proceeded with a sales-tax increase and stimulus measures. Sweden’s krona jumped as a report showed manufacturing expanded faster than economists predicted.
“The dollar is trading with a very slight or mildly weaker bias,” Nick Bennenbroek, the head of currency strategy at Wells Fargo Securities in New York, said in a phone interview. “The market is in a bit of wait-and-see mode. The recent experience in terms of political battles, shall we say, has been that the impact on markets has been limited.”
The Bloomberg U.S. Dollar Index, which tracks the performance of a basket of 10 leading global currencies against the dollar, dropped 0.1 percent to 1,011.10 at 5 p.m. New York time, after losing 2.8 percent last quarter, the most since 2010.

Market Levels

The U.S. currency was little changed at $1.3526 per euro after depreciating to $1.3588, the weakest since Feb. 6. The yen gained 0.3 percent to 98 per dollar and climbed 0.3 percent to 132.55 per euro.
The forint gained for a fourth day as data showed Hungary’s manufacturing expanded at the fastest pace in six months. The currency appreciated 0.5 percent to 296.02 per euro.
Sweden’s krona climbed 1.1 percent to 8.6034 per euro and was 1.1 percent stronger at 6.3604 against the dollar.
An index based on responses from about 200 purchasing managers rose to a seasonally adjusted 56 last month, the highest since May 2011, from 52.2 the previous month, Stockholm-based Swedbank AB (SWEDA), which compiles the data, said today. A reading above 50 indicates an expansion. It was seen declining to 52.1, according to the median estimate of eight economists surveyed by Bloomberg.

ECB Stance

European Central Bank President Mario Draghi said Sept. 23 he’s ready to deploy another long-term refinancing operation to fund banks. The central bank is scheduled to announce its next policy decision tomorrow.
The Australian dollar rose after the central bank left interest rates unchanged and said earlier cuts are still filtering through the economy and boosting asset prices.
The Aussie jumped 0.9 percent to 93.98 U.S. cents, after reaching the biggest one-day advance on a closing basis since Sept. 18.
The U.S. current account deficit is forecast to narrow to 2.5 percent of gross domestic product next year from 2.6 percent in 2013, according to a Bloomberg survey. The euro area’s 2 percent surplus is estimated to be unchanged in 2014, a separate survey shows.
“The fact that the Fed’s going to continue to expand its balance sheet and add to the U.S. monetary base relative to the rest of the world would tend to the be a negative for the dollar,” Robert Sinche, global strategist at Pierpont Securities Holdings LLC in Stamford, Connecticut, said in a phone interview. “You don’t have a capital-flow story, you do have a relative-balance-sheet story working against the dollar. You look around and have to say, ’why would I take incremental positions in the dollar here?’”

Government Closure

This is the first U.S. shutdown in 17 years as House and Senate lawmakers failed to agree on a spending plan for the new fiscal year that started today. Chances of a last-minute deal evaporated as the House stood firm on its call to delay major parts of President Barack Obama’s health-care law for a year. Senate Democrats were equally firm in refusing.
Fed Chairman Ben S. Bernanke and his colleagues at the Federal Open Market Committee decided last month to maintain their $85 billion-a-month bond buying program. Fed Bank of New York President William C. Dudley said on Sept. 27 that budget battles in Washington were among the risks to the outlook and he wanted to see more momentum in the economy before paring the pace of quantitative easing.
The Fed’s balance sheet has ballooned to $3.7 trillion from $1.6 trillion five years ago.
“The market is anticipating that a shutdown means the Fed will also maintain its easy policy stance for longer because of the risks to the U.S. economy,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “We are seeing some strength in the European currencies and a bit of weakness in the U.S. dollar.”

Abe Plan

Japan’s sales tax will be raised to 8 percent in April from 5 percent, Abe said in Tokyo today. He said a 5 trillion-yen ($50 billion) economic support package would reduce the negative impact of the increase. The Bank of Japan is scheduled to announce its next policy decision on Oct. 4.
The yen has tumbled 10.6 percent this year, the worst performer of 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 5.3 percent and the dollar gained 2.4 percent.
Trading in over-the-counter foreign-exchange options totaled $22.3 billion, compared with $20 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $4.5 billion, the largest share of trades at 20 percent. Options on the dollar-yuan rate totaled $3.7 billion, or 17 percent.
Dollar-yen options trading was 8 percent more than the average for the past five Tuesdays at a similar time in the day, according to Bloomberg analysis. Dollar-yuan options trading was 29 percent more than average.
To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net