Market Odds Of Government Shutdown Surge: Republican Sees “Chances As High 75%”

Thursday, August 24, 2017
By Paul Martin

by Tyler Durden
Aug 24, 2017

One week after Goldman raised its odds for a government shutdown from 33% to 50%, days after Treasury Secretary Steven Mnuchin issued the loudest warning yet that the debt ceiling situation has to be resolved over the next month, and one day after Compass Point said that after Trump’s Phoenix rally shutdown threat, the “odds of a government shutdown are now dramatically higher”, this morning the market-implied odds of a government shutdown have spiked to the highest yet, with the Oct. 12 – Sept. 28 T-Bill spread spiking by another 4bps to 20bps…

Confirming the market’s increasingly gloomy sentiment – or at least the bond market’s, stocks continue to trade on whatever is the latest CTA momentum whim – this morning Axios reports “top White House and GOP leadership officials tell us the chances of a market-rattling government shutdown are rising by the day — and were even before Trump threatened at his raucous Phoenix rally on Tuesday night to use a shutdown as leverage to get funding for a border wall.” Quoting a “top Republican source” who puts the chance as high as 75%, Axios adds that “the peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not.”

Axio’s Jonathan Swan also notes that it may all come down to Trump’s mood, as “Trump is spoiling for a fight and the [conservative House] Freedom Caucus haven’t had a fight for a while. That’s a dangerous dynamic.”

Meanwhile, away from the bond market, the Vix-term structure suggests that a government crisis will take place not in late September but the end of the year.

The Rest…HERE

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