Dow sank 405, decliners over advancers better than 3-1 & NAZ dropped a huge 354. The MLP index was off 1 to 183 & the REIT index fell 3+ to the 447s. Junk bond funds drifted lower & Treasuries continued to be sold heavily (more below). Oil eased back in the 75s after its recent rally & gold declined 16 to 1735.
AMJ (Alerian MLP index tracking fund)
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Treasury Secretary Janet Yellen told House Speaker Nancy Pelosi that Congress has just under 3 weeks to address the looming debt ceiling & avoid near-certain economic calamity. “We now estimate that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by Oct 18,” she wrote in a letter. “At that point, we expect Treasury would be left with very limited resources that would be depleted quickly.” Yellen, who will testify before the Senate later today, warned in a separate statement to lawmakers that failure to suspend or raise the debt limit would lead to the first-ever US default & have severe consequences for the US economy. “It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history,” she said in her remarks to the Senate Banking Committee. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.” Because the US has never defaulted on its debt before, economists have to rely on forecasts and guesswork when trying to estimate the economic fallout a default would bring. Still, most economists say such a default would bring about financial calamity that could trigger a broad market sell-off & economic downturn amid a spike in interest rates.
Congress must raise the debt limit by Oct. 18, Treasury Secretary Yellen warns as default looms
Nancy Pelosi told Dems in a caucus meeting that they must pass the $1.2T infrastructure bill this week before their massive reconciliation bill, a reversal of
her past stance that could throw the passage of both into doubt. She was allied with progressive members of her party who for months were
demanding that the reconciliation bill pass before infrastructure. But she
shifted that stance recently with the aim of uniting Dems around a
framework of a reconciliation bill – not fully passing it – before
moving ahead with infrastructure. But last night marked a full
reversal for Pelosi, who said stubborn Senate moderates & the looming
expiration of highway funds is forcing her hand. "There are many
things on the table, the Continuing Resolution, which expires September
30th, the highway reauthorization – authorization expires September
30th," Pelosi added. "But here's the thing: I told all of you that we wouldn't go on to the
BIF [until] we had the reconciliation bill passed by the Senate. We
were right on schedule to do all of that, until 10 days ago, a week ago,
when I heard the news that this number had to come down," Pelosi added. "It all changed, so our approach had
to change... We had to accommodate the changes that were being
necessitated. And we cannot be ready to say until the Senate passed the
bill, we can’t do BIF." BIF is Capitol Hill shorthand for the "Bipartisan Infrastructure Framework." Pelosi
emphasized that she is still committed to passing a reconciliation
bill. "It isn't about diminishing the importance of the reconciliation,"
she said of the bill Dems marked up at $3.5T. But the whiplash change in strategy is likely to upset progressives, who
said for weeks they will vote against the infrastructure bill unless
they have some kind of an agreement on the much more expensive
reconciliation bill.
Speaker drops demand to pass $3.5T spending spree before infrastructure bill
The benchmark 10-year Treasury yield rose again, trading at its highest levels since Jun & continuing a steady increase that began last week. The yield on the benchmark 10-year Treasury note was up 7.4 basis points to 1.558% & the yield on the 30-year Treasury bond added 9.7 basis points, spiking to 2.092%. Yields move inversely to prices & 1 basis point is equal to 0.01%. Federal Reserve Chair Jerome Powell, in prepared remarks to be delivered today, warned that higher inflation may last longer than anticipated. In the prepared speech, he said that economic growth has “continued to strengthen” but has been met with upward price pressures caused by supply chain bottlenecks & other factors. “Inflation is elevated and will likely remain so in coming months before moderating,” Powell added. Last week, the Fed indicated that it may soon begin pulling back its asset purchases. The central bank's updated economic projections also showed that ½ of the major Fed officials now see a rate hike in 2022. The updates from the central bank appear to have sparked a rise in yields across the time curve. The 10-year yield’s rise comes after the bonds traded at 1.30% at the end of Aug. The 30-year Treasury is trading at its highest yield since early Jul, while the 5-year yield is at its highest level since early 2020, before the Covid pandemic hit the US.
10-year Treasury yield tops 1.54%, reaching highest point since June
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