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Clarksville, TN – As was widely anticipated, lawmakers reached an 11th-hour agreement on the budget and debt ceiling. The “Continuing Appropriations Act, 2014″ funds the government through January 15th, suspends the debt ceiling to February 7th, and requests bipartisan House/Senate budget negotiations by December 13th.
Thus, while the deal dodges a near-term financial catastrophe, it does not remove uncertainty entirely. Lawmakers will have less than three months to agree on a new spending authorization.Note that another round of sequester cuts (detested by both parties) is set for January 15th. The debt ceiling will go back into effect on February 7th, but Treasury can still take extraordinary measures to borrow for a few weeks and perhaps several months.
The federal government is back at work. The Bureau of Labor Statistics has announced a revised release schedule for delayed economic reports, but the timings of releases from other agencies are pending.
Federal workers will receive back pay, but private contractors who lost business due to the shutdown (for example, food service suppliers to the Smithsonian Museums) will not be paid.
The Fed cited uncertainty in Washington as one factor in the September decision to delay the initial reduction in the rate of asset purchases. The market sees the continued uncertainty as likely to prevent a December tapering (all else equal: lower bond yields and higher stock prices), but Fed action will depend on the economic data.
Next week, some of the delayed economic data reports will roll in. The September employment figures will be the most important. Note that there is some seasonal adjustment uncertainty in the September jobs data (due to the start of the school year) – so there’s a good chance for a surprise. Looking ahead, we can expect payrolls to take a hit in the report for October (now due on November 8th) and bounce back in November (data due December 6th).
Consumer Money Rates
Treasury Yield Curve – 10/18/2013
S&P Sector Performance (YTD) – 10/18/2013
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business October 17th, 2013.
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