Danske Bank analysts note that late yesterday, US President Trump announced a bipartisan budget deal was finalised, making it possible for the House to pass the necessary legislation before its summer recess starts on Friday while the Senate will vote on it next week.
Key Quotes
“As it is bipartisan, we think it would make it through congress despite some concerns among both Republicans and Democrats. The deal includes two important things. First, the debt limit will be suspended until 31 July 2021 (i.e. after the presidential election), which means the US Treasury can soon start issuing bonds in a normal fashion again and also rebuild its cash buffer.”
“Second, the automatic reduction of the so-called spending caps, which should have kicked in on 1 October and would have reduced total government spending by more than USD100bn, has been cancelled. This means fiscal policy will not go from being very expansionary to very contractionary but instead become neutral. Despite the agreement on overall funding, there is still a risk of a government shutdown by 1 October if Congress has not passed spending bills.”
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