US Meltdown Day -1, Time to Do or Die

Now that things have dragged on to the final few hours, it looks like a bill that can pass both houses will proceed through the House and Senate, and kick the can down the road for less than 6 months. The US rating agency Fitch was about to downgrade US Treasury debt, probably causing another spike in rates.

The news came as the Treasury Department said it had only about $35 billion in cash on hand. It expects to run out of “extraordinary measures” to keep on paying all of the government’s bills on Thursday, at which point outgoing payments might exceed that cash, plus any revenue, on any day going forward.

As the United States nears default, investors have demanded more compensation for lending to the government, with yields on short-term debt spiking to their highest levels in years.

Fitch warned that Congress has not “raised the federal debt ceiling in a timely manner.” It said that it “continues to believe that the debt ceiling will be raised soon,” but that “political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.”