The break is over. It's that time again to shift our attention back to the US fiscal situation.
Nomura's America's Morning Comment notes the confluence of events (sequester, budget, debt ceiling, new budget outlook) that will begin to dominate.
Attention may start to shift back to the US as the pieces of the upcoming fiscal policy negotiations begin to fall into place as the strong European data quell yesterday’s euro area political concerns. Yesterday, President Obama signed into law the debt ceiling extension bill that will extend US borrowing capacity through mid-May. Yesterday was also the statutory deadline to submit a budget request set out in the Budget and Accounting Act of 1921, a largely symbolic deadline which carries no enforcement or penalty mechanism. Still, Speaker Boehner used the deadline to propose the introduction of a bill that would require the President to submit a balanced budget. House Republicans will be discussing the measure in a closed conference this morning followed by a media briefing with the party’s leadership.
Separately, the Congressional Budget Office (CBO) will be releasing its semi-annual budget and economic outlook report today which will be the subject of a House Budget Committee hearing tomorrow. Meanwhile, the House and Senate Democrats will be holding policy retreats this week where we expect leaks and press reports to provide insight into the party’s strategic approach to the upcoming sequestration and budget negotiations. The CBO report and news flow out of both parties’ leadership may begin to shift market attention back toward the unresolved, and still contentious fiscal policy debates.
