WASHINGTON (MNI) – The following is a roundup of key developments
and events Monday and over the weekend on the ongoing stand-off over the
U.S. debt ceiling:

* The debt ceiling agreement will be placed on a bill that is
pending in the Senate and is likely to be voted on by the upper chamber
Monday. Assuming it passes the Senate, it will then be sent to the House
for a final vote, presumably Monday night or Tuesday. Passing this
package through both chambers in a few days will be difficult,
especially since it will require a very unusual coalition of Democratic
and Republican lawmakers to support it. The agreement seems likely to
pass the Senate by a strong vote but is almost certain to face a close
vote in the House.

* Japanese government bond prices turned mixed on Monday
morning, after President Obama confirmed a debt ceiling agreement has
been reached, which helped ease risk-aversion. The September 10-year
bond futures contract at midday closed down 0.04 at 141.79, after moving
between 141.73 and 141.95. In Asia, yields on Treasury’s 10-year notes
were up three basis points at 2.83%, while yields on 30-year debt were
up one basis point at 4.14%.

* Asian stocks and the dollar rallied after U.S. President
Barack Obama announced a debt deal that would avoid a U.S. government
default, but markets remained wary amidst uncertainties over the deal’s
passage by Congress as well as damage already done to the reputation of
U.S. creditworthiness. The sharpest reaction to the news came from
Japan, where the Nikkei stock index topped the key 10,000 level, ending
the morning up 1.84% at 10,013.90, while dollar-yen rose to Y78 before
slipping back slightly.

* President Obama said Sunday night that he’s reached an
agreement with the bipartisan leadership in Congress to increase the
statutory debt ceiling and enact a substantial package of spending cuts.
“The leaders of both parties in both chambers have reached an agreement
that will reduce the deficit and avoid default,” Obama said in comments
in the White House press room. Obama said the agreement will be reviewed
by House and Senatemembers Monday, adding that Congress must hold “some
very important votes” to pass the package in the coming days. “We’re not
done yet,” he said, referring to the need for both the House and Senate
to approve the plan.

* Mechanics of the deal: Immediately enacted 10-year
discretionary spending caps generating nearly $1 trillion in deficit
reduction; balanced between defense and non-defense spending. President
authorized to increase the debt limit by at least $2.1 trillion,
eliminating the need for further increases until 2013. Bipartisan
committee process tasked with identifying an additional $1.5 trillion in
deficit reduction, including from entitlement and tax reform. Committee
is required to report legislation by November 23, 2011, which receives
fast-track protections. Congress is required to vote on Committee
recommendations by December 23, 2011. Enforcement mechanism established
to force all parties — Republican and Democrat — to agree to balanced
deficit reduction. If Committee fails, enforcement mechanism will
trigger spending reductions beginning in 2013 — split 50/50 between
domestic and defense spending.

* Senate Majority Leader Harry Reid’s office issued a brief
statement Sunday evening saying Reid is willing to accept a debt limit
agreement that was largely negotiated by President Obama and Senate
Minority Leader Mitch McConnell. “Senator Reid has signed off on the
debt ceiling agreement pending caucus approval,” said the statement from
Reid’s office.

* The U.S. dollar ended in Asia holding a mixed tone, just off
session highs against the yen but also above the day’s lows versus the
euro as the U.S. debt ceiling agreement kept risk sentiment supported.

* Euro-dollar retained a firm tone through European morning
trade Monday as traders awaited the outcome of the House and Senate
votes concerning the proposed plan to raise the US debt ceiling.

–Editor: Brai Odion-Esene; besene@marketnews.com

** Market News International Washington Bureau: 202-371-2121 **

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