NEW YORK - Financial conditions in the U.S. were little changed as the first partial government shutdown in 17 years entered its ninth day and Congress remained deadlocked over raising the debt ceiling to avert a potential default.
The Bloomberg U.S. Financial Conditions Index fell 0.005 to 1.15 after decreasing 0.03 yesterday. The gauge measures stress in the markets by combining everything from money-market rates to yields on government and corporate bonds to volatility in equities. The index, which fell to as low as negative 1.631 during the debt-ceiling debate of August 2011, is the lowest since July 11, when Federal Reserve officials announced that further improvement in the labor market was needed before it would begin scaling back $85 billion in monthly bond purchases.
Even as Senate Democrats started setting up a test vote for this week on a plan that would push the next debt-limit fight into 2015, lawmakers are far from an agreement amid verbal sparring between President Barack Obama and House Speaker John Boehner. Treasury Secretary Jacob J. Lew said over the weekend that Congress must boost the debt ceiling by Oct. 17 or the U.S. risks defaulting on its payments.
“The shutdown, as well as the wrangling over the debt ceiling, are both causing unnecessary harm to our economy,” Alan Krueger, a labor economist at Princeton University who served as chairman of President Barack Obama’s Council of Economic Advisers, said in an interview today on Bloomberg Television. “It would be better if cooler heads prevailed.”
Rates surged for a second day on Treasury bills maturing on the debt-ceiling deadline. Rates on Treasury bills due on Oct. 17 climbed 13 basis points to 0.41 percent after jumping 14 basis points yesterday. They were negative as recently as Sept. 26. The securities are yielding more than the 0.177 percent yield on the one-month London interbank offered rate.