Tuesday, January 22, 2013

Suspending the Debt Ceiling

by Bill McBride on 1/22/2013 09:07:00 PM

Earlier on Existing Home Sales:
Existing Home Sales: Another Solid Report
Existing Home Sales in December: 4.94 million SAAR, 4.4 months of supply
Existing Home Sales graphs

And on apartments: NMHC Apartment Survey: Market Conditions Loosen Slightly

From CNBC: GOP Moves to Suspend Debt Ceiling Until May

House Speaker John Boehner indicated Tuesday that Republicans will vote on an extension of the federal debt ceiling to allow Treasury to borrow money until mid-May. ...

... the next moment of high political and market drama will occur when the so-called "sequester" or automatic across the board spending cuts, kicks in on March 1.
After the "sequester" comes the "continuing resolution" on March 27th. Note: Congress decided last September to extend spending authority for six months with a "continuing resolution".

I expect something will be worked out on the sequester, but there is a strong possibility the “continuing resolution" will lead to a government shutdown. A government shutdown would be disruptive, but probably not catastrophic since most of the government expenditures would continue.

Of course I think they should suspend the debt ceiling permanently (the debt ceiling is about paying the bills). From Ezra Klein: Suspending the debt ceiling is a great idea. Let’s do it forever!

Wednesday economic releases:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• 8:45 AM, LPS will released their "First Look" report on December mortgage performance

• At 10:00 AM, FHFA House Price Index for November 2012. This was original a GSE only repeat sales, however there is also an expanded index that deserves more attention. The consensus is for a 0.7% increase in house prices.

• During the day: The AIA's Architecture Billings Index for December (a leading indicator for commercial real estate).