Just a few days more of this debt ceiling (R. Narvas)

Just a few days more of this debt ceiling

The clock continues to tick towards the Treasury's August 2 deadline and we continue to see little progress towards an agreement to raise the debt ceiling. The parties continue to be firmly dug into partisan lines, although the Republicans are looking more fractured. If no deal is done, there is the option of adopting the Reid-McConnell plan proposed last week, but also the atomic bomb of the President invoking the 14th amendment. In the case of a downgrade or default, it seems that the majority of Treasury holders may not be forced sellers. That said, repo markets are already dislocated due to the debt crisis, as players build up cash reserves, preparing for the worst.