- The New York Times – As Shutdown Talk Rises, Trump’s Immigration Words Pose Risks for Both Parties
President Trump’s incendiary words about immigration have dampened the prospects that a broad spending and immigration deal can be reached by the end of the week, raising the possibility of a government shutdown with unknown political consequences for lawmakers in both parties.
Comment
The table above shows the yield of Treasury bills that mature between now and early March. If Washington D.C. were to shut down, the federal government is not allowed to prioritize payments. That means even though it has the money to pay 90+% of its bills after a shutdown, either everyone gets paid or no one gets paid. If the government was allowed to prioritize, it would violate the separation of powers as Republicans would have different priorities than Democrats.
So if the government were to shut down, maturing Treasury securities would not get paid. A premium would open between the Cash Management Bill (CMB) maturing on January 18 and standard issue 3-month bills maturing on January 25. The graphic above shows no real premium. Prior shutdown threats saw similar spreads widen to as much as 20 basis points, versus .1 basis point now.
The Treasury market is putting the probability of a shutdown at close to 0%.