The Day at a Glance | September 28 2021

The Top

*Republican Senators block democratic bill to fund government and suspend debt ceiling, increase likelihood of a government shutdown in the US.

*Secretary of the Treasury Janet Yellen will appear before Congress and answer questions about a possible default.

*Central Bank of China is committed to containing Evergrande`s problems and avoiding a debt crisis.

*Unemployment in Mexico drops to 4.3% during August.

*The ECB should not overreact in light of a temporary upsurge in inflation: Christine Lagarde.

*James Bullard (St. Louis FED) is in favor of reducing the central bank`s balance and raising interest rates twice in 2022.

Economic environment

Democrats face small room for maneuver to avoid a government shutdown. Republicans have rejected a bill that considered suspending the debt ceiling and extending government funding through 2022, which considerably increases the chances of seeing a government shutdown on October 1st. Along with this is the risky approval of Biden`s economic plan, whose advancement depends on resolving discussions about the debt ceiling. In case an agreement is not reached, the Treasury Department would run out of resources at the end of October or beginning of November – other than the government shutdown – which would lead to the non-payment of debt issued by the country. Markets are still not showing concern about the issue given the fact that discussions about the debt ceiling have caused a government shutdown to occur in previous occasions; a solution has always been reached before the country`s non-payment of debt affects its creditworthiness. In 2011 and 2013 markets only started showing concern as the non-payment date approached, and the worst moment occurred in 2011 when the sovereign credit rating was decreased. Democrats will have to opt to continue without Republican support and unilaterally suspend the debt ceiling through a reconciliation process (which entails high political costs) or start debating with Republicans in order to reach an agreement that would surely affect Biden`s economic plan.

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