Treasury traders are bracing for their own outbreak of March madness, with a plethora of risks on the radar, including the coming reinstatement of the U.S. debt ceiling.If they reset the debt ceiling higher, then Treasury increases length of term structure, the ten year pops up.
March 1 marks the final day of the borrowing cap’s suspension, and the limit’s return will start the countdown until America runs out of so-called extraordinary measures to keep the government funded. Friday is also the official deadline for an increase in U.S. tariffs on goods from China, although progress in negotiations indicates that could well be delayed.
The cause here is that Congress doesn't like the political exposure, and likely wants a higher debt ceiling so the interest cost trajectory is predictable. Short term budget management is impossible in Congress because of the 'precious government goodie' problem, that is why we pay the ten year rate.
This negotiation is where Congress needs a long term deal, a contracted tax and sequester. If the get this now then they pre-empt a long two year tax battle. Good luck.
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