The Senate is set to vote later today on a deal that would fund the government for two years and add $500 billion in new spending to a deficit already pegged at north of $1 trillion. The deal is extremely likely to pass the Senate–it’s got something for just about everyone except the people who will have to pay down the road.
President Trump tweeted his support for the deal this morning. And the House will be under intense pressure to cobble together enough Republican and Democratic votes to pass the measure, despite rebellion from both the Republicans in the far-right Freedom Caucus and progressive Democrats who object to the increase in military spending and Congress’s failure to take up legislation to protect the 700,000 Dreamers who become eligible for deportation on March 5 when DACA expires (unless the courts stay that decision by the Trump administration, The bond market is, I’m sure, happy that the government will continue to operate and that Congress has suspended the debt ceiling until March 1, 2019.
(What do you know? That’s safely after the mid-term elections.) The United States won’t run out of money to pay obligations on Treasury debt this March. But the bond market continues to sound a negative note on Washington’s decision to pile debt on top of more debt.
The yield on the 10-year Treasury climbed to 2.87% this morning, a new four-year high and higher than the yield before the stock market sell off resulted in a flight to safety that supported Treasury prices.