Nobody tell Washington, but it may have another week to avoid debtmageddon. Perhaps Congress can have the weekend off after all.
In a note published on July 14, BarCap’s Interest Rates Research team looked at US treasury data from the day before and agreed with Tim Geithner that August 2 was the best guess for when his bag of accounting tricks would be empty. However, relative to assumptions made in that note, inflows to the US treasury have been a lot higher, and outflows a little lower, according to BarCap. Last week inflows came in $14bn higher and outlays $1bn lower.
Its new best guess: August 10.
Similar doubts about August 2 were voiced earlier this month by Nomura, who reckoned August 9 was a more realistic drop-dead date. It’s especially difficult to predict inflows and outlays at the moment because of the measures the US treasury is taking to extend its borrowing authority, so this is all a bit of an academic exercise — but it does mean there may be a bit more time to write the relevant legislation. In theory it means there’s also more time to reach a comprehensive deal, such as the one proposed by the Gang of Six. But then there’s more time for everything to fall apart, too.
And with a big coupon payment due on August 15, there’s still no time to waste, as BarCap conclude:
So should policymakers wait till August 10 to come to an agreement?
If they can agree sooner, absolutely not. There are no definites in this case.
Related links:
Goldman’s countdown to debtmageddon – FT Alphaville
The debt ceiling: break in case of emergency – FT Alphaville