Welcome to Thunderdome Week

From: POLITICO's Morning Money - Monday Sep 27,2021 12:02 pm

Sep 27, 2021

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Quick Fix

Welcome to Thunderdome Week — Fiscal issues come to head this week with the need for Congress to pass some kind of temporary funding measure to keep the government open into October. Then the debt limit hits sometime next month or early November.

The White House is quick to note that Republicans can simply support the House bill that would deal with both and avoid any kind of hit to the economy. They ran up most of the recent debt, the thinking goes, and they should agree to finance it.

This is not at all incorrect. But it’s not going to happen. That House measure is toast in the Senate and it’s going to eventually fall on Dems to get a continuing resolution done and then include a debt limit hike in their resolution package. The fact that this sucks for Democrats and may make for some bad midterm politics does not change the facts on the ground.

Infrastructure vote coming Thursday — Via our Sarah Ferris and Heather Caygle: “Speaker Nancy Pelosi on Sunday announced the House will vote Thursday on President Joe Biden’s infrastructure bill, as Democratic leaders race to unify their fractious caucus ahead of a critical week. …

“Pelosi and her leadership team had signaled for days that the vote could slip past Monday, with dozens of progressives threatening to block it without action on Biden’s separate multi-trillion-dollar policy bill. But moderates have fiercely resisted a delay much longer than 24 hours, vowing to ditch the party-line talks altogether if leadership broke the commitment.”

A make or break week — Via our Natasha Korecki and Laura Barrón-López: “Though he is beset by turmoil overseas, confronting chaos at the border and struggling to contain a deadly pandemic back home, the president’s main challenge this week comes from his own party. …

“With his economic and domestic policy agenda on the line … Biden needs a big win from his fellow Democrats, whose early unity around his presidency has been strained in recent months. ...

"The impact on Democrats if they come up short: ‘Disastrous, said John Podesta, a veteran Democrat and former counselor to Barack Obama. ‘You need all three of those things’ to have any hope of keeping their majorities in the 2022 midterms, Podesta said.”

GOOD MONDAY MORNING — How about that Sawx-Yanks game last night? Crazy stuff. Email me on bwhite@politico.com and follow me on Twitter @ morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

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DRIVING THE WEEK

The fiscal fights and votes will dominate the week with Democrats desperate to push Biden’s agenda forward and deal with both government funding and the debt limit. In the end, they will have to do most of it on their own … Biden travels to Chicago on Wednesday to talk about the Covid-19 response …

OIL HITS THREE-YEAR HIGHS — Via Reuters: “Asian shares got off to a cautious start on Monday as a jump in oil prices to three-year highs could inflame inflation fears and aggravate the recent hawkish turn by some major central banks.”

DEBT LIMIT ALL ABOUT 2022 — Bloomberg’s Mike Dorning: “The U.S. is heading to the precipice of a debt default as much for the sake of campaign ads and political branding as fiscal philosophy.

“While agreeing that the statutory limit on U.S. borrowing must be raised before it’s breached sometime next month, Republicans and Democrats are completely at odds over who should act. ... Senate GOP leader Mitch McConnell argues that Democrats alone are responsible since they are pursuing a partisan multitrillion-dollar tax and spending plan. The Senate’s top Democrat, Chuck Schumer, accuses Republicans of trying to ‘dine and dash’ on the cost of their 2017 tax cuts"

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Fly Around

FED’S COMING TAPER FANS TALK OF RENEWED ‘REFLATION’ TRADE — Reuters’ David Randall: “The Federal Reserve’s signal that it will soon unwind its bond buying program is bolstering the case in financial markets for the so-called reflation trade, which lifted Treasury yields and boosted shares of banks, energy firms and other economically sensitive companies in the early months of 2021.

“The reflation trade stalled during the summer. But the central bank said this week it would likely begin pulling back on its $120 billion a month government bond purchasing program as soon as November, while also signaling that it may raise interest rates in 2022, earlier than many expected. Though monetary tightening is frequently seen as a drag on stocks, some investors view the Fed’s stance as a vote of confidence for the U.S. economy.”

SEC PUNTS ON ‘UNREASONABLE’ RULE THAT SURPRISED BOND TRADERS — SEC’s Jack Pitcher: “The U.S. Securities and Exchange Commission is giving bond markets at least three more months to prepare for a rule revision that industry insiders say would upend trading for some debt securities.

“The amendment to SEC Rule 15c2-1, set to go into effect on Tuesday, is intended to protect investors in over-the-counter trading markets from pump-and-dump schemes often seen with penny stocks. The change mandates that ‘broker-dealers, in their role as professional gatekeepers to this market, do not publish quotations for an issuer’s security when current issuer information is not publicly available.’”

CORPORATE-BUYOUT LOANS NEAR HIGHS OF 2007 — WSJ’s Matt Wirz: “A buyout boom fueled by easy money and a looming hike in the capital-gains tax is sweeping Wall Street deal making to highs not seen since before the 2008 financial crisis.

"Companies have issued $120 billion of ‘leveraged loans’ this year through Sept. 23 to finance corporate buyouts by private-equity firms — just shy of the $124 billion record for the first nine months of the year set in 2007, according to data from S&P Global Market Intelligence’s LCD. Most deals have also gotten bigger. The average leveraged buyout cost about $2.5 billion in debt and equity this year, eclipsing the mean of roughly $2 billion in 2007, according to S&P.”

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Fly Around

CHINA SUPPLANTS U.S., FED AS BIGGEST RISK FOR EMERGING MARKETS — Bloomberg’s Netty Idayu Ismail and Archana Narayanan: “Emerging-market investors are about to find out whether there’s more to worry about in China than just the Evergrande debt crisis. Official and private gauges of Chinese manufacturing are due out Thursday, with expectations they’ll add to evidence of sputtering growth. Concerns that the world’s second-biggest economy is slowing have hobbled the currencies and stocks of developing nations in recent weeks, erasing gains sparked by the U.S. Federal Reserve’s assurance of a calibrated tapering of its stimulus measures.

“China has now emerged as their biggest risk. While Evergrande has sparked fears of a property-market slowdown, investors worry even more about the stalling of the broader economy due to virus curbs and spending cuts by consumers. Some are looking to diversify into markets less reliant on China’s growth, such as India and Egypt.”

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STABLECOINS IN SPOTLIGHT AS U.S. BEGINS TO LAY GROUND FOR RULES ON CRYPTO — WSJ’s Andrew Ackerman: “The Biden administration is taking aim at so-called stablecoins as it begins to lay the ground for stricter regulation of cryptocurrencies that could shape the future of digital money.

“Stablecoins are a form of digital currency issued by companies such as Tether Ltd. and Circle Internet Financial Inc. and designed to combine the stability of national currencies like the dollar with the ability to trade quickly online like bitcoin. Because stablecoins are backed by safe assets such as Treasurys, they should maintain a tight link to the dollar and easily be redeemed for dollars, the issuers say. This contrasts with cryptocurrencies like bitcoin that aren’t backed by assets and can fluctuate wildly in value.”

TRANSITIONS — Per release: “Mindset, a bipartisan public policy consultancy, is pleased to announce that Doug Lee has joined the company as Senior Director. Lee will play a leading role in Mindset’s respected tax, trade and appropriations practice, and contribute significantly to Mindset’s analytical and policy research work supporting our diverse base of business, non-profit, and investor clients."

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