Baum on Money: Shutdown Yields Yellen

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Good morning, all. And welcome to your midweek edition of what I'm reading.

Our long national nightmare is over

Janet Yellen it is: the first woman set to lead the Federal Reserve in its 100-year history. Just imagine if President Obama had told Larry Summers to keep his withdrawal letter to himself so that he could nominate Yellen and make it seem as if she was his first choice. Seen on Twitter last night: "It took a government shutdown to get Obama to nominate Yellen." Touche.

Light at the end of the tunnel?

Obama was adamant that he would not negotiate over the debt ceiling. Yet eight days into the government shutdown with the debt limit looming, the president indicated he is willing, nay eager, to talk. "Obama's position hasn't shifted, but his emphasis has," is how Politico characterized the president's new-found interest in discussing fiscal issues with House Republicans. At his press conference yesterday, Obama said he was would accept a temporary measure to fund the government and raise the debt ceiling while the two sides talk about long-term budget issues. It's a first step, and a good inducement for Republicans to stop digging an even deeper hole.

Narrowing the window

The Bipartisan Policy Center fine-tuned its "X date" -- the date on which the Treasury will be unable to meet its financial obligations -- to the period between Oct. 22 and Nov. 1. The Treasury can roll over maturing debt without any effect on the debt limit. Absent an increase in the borrowing authority, investors are apt to demand higher yields in exchange for the greater perceived risk. And that means higher debt-service down the road. The BPC itemizes all the payments that are due in the next month. It's a great resource on all things budget-related.

T-bill market dares to think the unthinkable

The Treasury sold 4-week bills yesterday at 0.35 percent, the highest rate in five years. Two weeks ago, one-month bills were trading close to zero percent. The administration's saber-rattling on default is clearly starting to rattle the front end of the market out to about three years.

Consumers validate T-bill sentiment

Americans' confidence in the economy last week took its biggest dive since Lehman Brothers collapsed five years ago, according to Gallup. The 12-point decline to -34 was the second largest in since Gallup began tracking confidence in January 2008. Of the two components, consumers' outlook for the economy fell twice as much as the current conditions index. It will be interesting to see if a loss of confidence in the economy manifests itself in consumer spending, but we'll have to wait until the government reopens to get a reading on that. In a separate article, Gallup says government dysfunction is the main driver of the confidence drop. More Americans (33 percent) cite government as the nation's top problem than at any time since 1939.

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