Reinhart Week in Review by Madison Investments 10.01.2021


Debt Limit

The House of Representatives sent two separate bills to suspend or raise the Treasury’s debt ceiling to the Senate, and in both cases, Republicans blocked simple majority votes. Treasury Secretary Yellen has indicated that without additional borrowing the Treasury will run out of funds on October 18th, while the Congressional Budget Office (CBO) has estimated that this would happen in late October or early November. Yields on T-Bills in this date range have risen on concerns about delayed payments.

Our Take: Republicans want Democrats to have to use the reconciliation process to raise the debt ceiling in order to further campaign against them on fiscal issues. Democrats are stating that the increase is necessary to pay for previously enacted Republican policies. Both sides are seeking political advantage. A default on the payment of Treasury obligations would result in a catastrophic financial crisis, massive social upheaval and a major global depression. Because of the dire consequences of a default, it is almost a certainty that the debt ceiling will be raised either through the reconciliation process or by Democrats offering Republicans something to allow a vote on a bill in the Senate.

Municipals

State and local governments issued nearly $33 billion of debt in September. This marks a 30% decline from the same time period in 2020 according to Bloomberg. 2021 total issuance has reached $335 billion which is slightly higher than 2020 issuance. October issuance is expected to trail 2020 levels as state and local governments rushed to issue debt before the 2020 election.

Our Take: Issuance has slowed recently due to rising interest rates and may continue to slow due to uncertainty surrounding COVID and the delta variant. However, compared to years prior to 2020, 2021 issuance remains strong.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”), which also includes the Madison Scottsdale office. MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

Any performance data shown represents past performance. Past performance is no guarantee of future results.

Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.

This website is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”), which also includes the Madison Scottsdale office. MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.
Any performance data shown represents past performance. Past performance is no guarantee of future results.
Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.
This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.