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

* A U.S. Treasury official told reporters that the government
will be going forward with the August refunding, assuming the bill to
raise the debt limit will pass. He predicted the legislation will pass
by Tuesday night.

* The U.S. Treasury estimated it will borrow $331 billion of net
marketable debt in the third quarter of 2011, assuming a $110 billion
cash balance on September 30, the Treasury announced Monday afternoon.
The borrowing estimate is smaller than the prior estimate of $405
billion borrowing, which assumed a cash balance of $115 billion at the
end of September. “The decrease in borrowing largely relates to lower
outlays and cash balance adjustments,” Treasury said. For the fourth
quarter of 2011, Treasury estimated it would borrow $285 billion,
assuming a $100 billion cash balance on December 31.

* House Speaker John Boehner said Monday that the final debt
ceiling agreement is fully consistent with the central goals that
Republican leaders set out during the beginning of the debate and is
deserving of broad support. Boehner said the final debt hike package was
negotiated by all leaders in Congress and President Obama, adding that
all of these leaders have a responsibility to line up “sufficient votes
to make sure it passes.”

* Senate Majority Leader Harry Reid said Monday afternoon that
the the House will vote first on the debt ceiling agreement, and then
send the bill back to the Senate. In comments to reporters after meeting
with Vice President Biden and Senate Democrats, Reid said he hopes the
Senate could vote on the plan Monday evening but said this is not
certain. Reid said he believes the bill can pass the Senate, but added
that he is not yet ready to “declare victory” for the agreement.

* U.S. Vice President Joe Biden Monday declared his confidence
that Congress will pass the legislation to raise the debt ceiling agreed
to by the White House and leaders in Congress. Speaking to reporters
following a meeting with House Democrats to explain details of Sunday
night’s agreement, the vice president said “I feel confident” that the
bill will pass Congress. Highlighting the fact that, if passed, the bill
would ensure the debt ceiling issue does not come before lawmakers again
until 2013, Biden said this will allow the administration to focus on
job creation.

* Moody’s Monday revised the outlook on the State of Minnesota’s
general obligation bonds and state supported debt to negative from
stable. The negative outlook primarily reflects the growing negative
GAAP undesignated unreserved fund balance, political intractability that
has resulted in the reliance on one-time measures to solve the $5
billion budget gap in the current fiscal 2012-2013 biennium, and the
likelihood of future structural budget gaps as a result of the use of
the one-time budget measures.

* In an analysis of the impact of the Budget Control Act, the
Congressional Budget Office Monday estimated that, in total, if
appropriations in the next 10 years are equal to the caps on
discretionary spending and the maximum amount of funding is provided for
the program integrity initiatives, the legislation apart from the
provisions related to the joint select committee would reduce budget
deficits by $917 billion between 2012 and 2021. In addition, legislation
originating with the joint select committee, or the automatic reductions
in spending that would occur in the absence of such legislation, would
reduce deficits by at least $1.2 trillion over the 10-year period.
Therefore, the deficit reduction stemming from this legislation would
total at least $2.1 trillion over the 2012-2021 period.

* Apart from the provisions related to the joint select
committee, the CBO estimated savings in discretionary spending would
amount to $741 billion, mandatory spending would be reduced by $20
billion, and the savings in interest on the public debt because of the
lower deficits would come to $156 billion.

* In the agency bond market, the Federal Home Loan Mortgage
Corporation, or Freddie Mac, is scheduled to announce its Benchmark Note
Tuesday, on the same day as the deadline for Congress to pass a bill
raising the debt limit. With no guarantee that a bill will pass and the
debt ceiling raised, market sources believe that Freddie Mac will forgo
issuance.

* A “Yes” vote in both the House and Senate would go a long way
to improve risk sentiment, but the market would still be left with other
less promising truths. First, the $2.4 trillion in budget reduction will
likely not be enough to prevent Standard & Poors from downgrading the
United States credit rating from ‘AAA’.

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

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

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