Capitol Hill Democrats and Republicans reached an agreement to raise the U.S. debt limit “in early December” in a stopgap deal that would provide short-term relief to investors and executives who were concerned about the possibility of the U.S. government defaulting. Like this month.
“We reached an agreement to raise the debt limit in early December, and we hope we can get it done by today,” Senate top Democrat Chuck Schumer told lawmakers Thursday morning.
Republican Senate Minority Leader Mitch McConnell said the deal came a day after his party spoke of extending the nation’s orrow short-term. Republicans have been rejecting Democrats’ requests for months to increase their debt by trying to link the country’s existing debt to the Biden administration’s ambitious spending plan.
Earlier Wednesday, U.S. President Joe Biden leaned on corporate leaders to help him sue over why Congress should work to raise the debt limit and avoid defaulters. U.S. Treasury Secretary Janet Yellen warned that there was a risk that the government would run out of money by October 18 if the agreement was not reached.
U.S. stocks rose and short-term government debt, which was dumped by investors the previous week, rose significantly towards the end of Wednesday and Thursday, as traders outperformed the risk that the debt ceiling would affect the market this month.
The S&P 500 advanced 1.5 percent in early trading last Thursday for its best day since July after the announcement of the census.
The yield on the October 2 mature Treasury bill fell 0.03 percentage points to 0.04 percent, well below the 0.14 percent traded on Tuesday. The t 4tn Bill Market, an important source of federal government funding, has been closely scrutinized since the expiration of the limitation period.
However, the recovery is expected to last only until the beginning of December, with investors moving to sell mature Treasury bills that month. On December 16, the outstanding bill yield rose to 0.08 percent from 0.05 percent the day before. Yields increase when bond prices fall.
Thursday’s progress came as a relief to investors, with the stop-gap measure creating another potential showdown ahead of Christmas. It follows a short-term agreement to fund the federal government until Dec. 3.
If Congress does not reach an agreement to continue funding the government by that date, lawmakers will again risk government shutdowns, leaving thousands of federal workers out of work.
“Eleven hours of flashbacks are given in light of Congress’ earlier approach to the issue of elevations, and it’s interesting to think about the catastrophe of a default. . . Exercise, it will ultimately be academic, ”said Ian Lingzen, a strategist at BMO Capital Markets.