Because the Teapublican Party shut down the government, there is more money for government "extraordinary measures" which puts the real default date to between November 1 to 15th, say some Wall Street firms.

This must be why the Tea Party-run House of Representatives thinks they can continue their games. But the world thinks October 17th, so October 17th it will be when markets crash if the Teaparty nut jobs keep up their extortion temper tantrum.

In a note to clients, BofA Merrill Lynch interest rate strategist Marcus Huie says November 15 is probably the real drop-dead date for the Treasury, at which point it would have to default on short-term obligations


The note to clients reads:
As of Tuesday, 8 October, the Treasury had $32bn of cash balance and $92bn in debt maneuver capacity, according to our estimates. The sum of these two, $124bn, reflects the actual payment capacity of the government. The Treasury can shift funds between the cash balance and debt maneuver capacity by issuing cash management bills or shrinking/raising regular bill sizes, within the overall payment capacity.

October 17 is the date specified by the Treasury that the debt capacity will run out. However, we do not attach any importance to this date, as payment capacity will still be $70bn, according to our estimates. But the date maintains symbolic and political importance for the negotiators, so the passage of this date without a deal would likely be met by a risk-off trade.

Also, after this date, all coupon bond auctions would likely be deferred in favour of rolling cash management bills, with the announcement of the 30y TIPS reopening on this date the initial test case.

Over the following several weeks, payment capacity drops gradually to $22bn on October 31, still enough to pay the $6bn coupon and roll over the bills maturing on this date, according to our estimates.

November 1 is when payment capacity runs out, due to large Social Security, Medicare, defense, and veterans payments of around $67bn. We project that only half the payments on this date can be made. It is very unlikely that the Treasury will be able to pay all its obligations on time on or past this date.

However, it is conceivable that bills maturing after Nov 1 can still be rolled over with new issuance, since the effective interest that needs to be paid every week is around $10mn, a rounding error in budget terms.

November 15 is when the Treasury would theoretically almost certainly default on its debt, if no debt limit deal is reached by then, since the coupon payment of $31bn is exceptionally large.


Jack Lew says things will indeed start to break down in 2 days:
Lew has said that the Treasury will have $30bn in cash left by the October 17 deadline. That matches the exact amount the Treasury has to pay for the rest of the month. According to the Congressional Budget Office and Barclays, the Treasury has to pay $30bn in total for social security payments on 16 and 23 October, as well as interest payments.

Those who debate Lew's version of events say that the Treasury will continue to collect income from taxes for the remainder of October – about $7bn a day, which will defray national expenses.

The Treasury can still, theoretically at least, borrow money. Barclays analysts said last week that the Treasury is free to "roll over," or refinance, its payments for the remainder of the month, which would delay the deadline after October 17. Lew has already complained about the nation's rising borrowing costs, and borrowing more during a crisis is sure to be increasingly expensive.


Meanwhile, Fitch is the first to say they are going to downgrade the US because of the GOP games with debt ceiling. We're all going to be paying for the GOP temper tantrum for awhile, default or not.
U.S. stocks fell on Tuesday as politicians in Washington failed again to reach agreement to raise the $16.7 trillion debt ceiling with less than two days to go until the government’s borrowing limit is breached.

After the stock markets closed, Fitch placed the United States’ AAA credit rating on watch for a downgrade, citing the risk of a debt default.

Stock futures plunged on the news.


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