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Reality in response to the current situation in the U.S. today from Credit Suisse 1. What is your current assessment deadlines funds from the Treasury? salvage auto auction - We believe that the ability to borrow under the current national debt ceiling will be reached on October salvage auto auction 15, and to this date, the Treasury will only have cash to finance the budget deficit. This is consistent with the assessment of the Minister of Finance Jack Lew, who spoke about the date of October 17. At this point, the Treasury will have about $ 24B of cash on its balance sheet. Take into account the gap between the income and expenditure by the end of October 24 the government fund balance becomes negative. Some also suggest that the Treasury can get some respite due to more income or savings from the suspension of the current government (Government Shutdown), but this is out of the question. However, later in October will be hard enough to repay the principal and coupon payments on bonds and notes, if the government does not stop payments on debt are not. 2. What data will be published during the suspension of the government? - As you already salvage auto auction know, the Friday is not published data on the level of unemployment, salvage auto auction the number of new jobs outside agriculture, orders for manufactured goods and construction costs (the full list of economic data next week, the publication of which may be delayed, see the table below ). It should also be noted that if the employment data still come out next week, the market participants it will cause a lot of questions about its accuracy. salvage auto auction 3. What will happen with TIPS, if you still will be delayed release on CPI? - Shoutdown after 16 October, when the release will have to be published until October 31 this year, will lead to the fact that the Treasury will announce the prices based on the data presented in the August release. In this case, fixing CPI Treasury will be higher than current market expectations: CPI Aug 13 '- 1.52% y / y, which is equal to 0.126% m / m. It is up 0.052% of the current market expectations for the month of September. 4. What happens to the auction on placement of debt securities during shoutdown? What happens if the state ceiling. salvage auto auction not increase the debt on time? The Treasury is still open and placement auctions of debt securities held as scheduled. As for the state ceiling. debt, then technically, the amount of the auction is not a duty to the limit until it will not be installed. Auctions, which should take place next week, anyway make no risk, given the amounts claimed placements. Especially Treasury stated publicly that emergency measures will not last longer than until 17 October. Raises some questions about auctions TIPS October 24 and 2 -, 5 - and 7-year auction at the end of the month. On the settlement date October 31, from the Treasury will require that they do not exceed the ceiling of state. debt a week after a 24th number out of cash and a new limit on the ceiling state. salvage auto auction debt will come into force. And even in such a situation, the Treasury can compensate for the increased release of coupon debt securities by issuing promissory notes, in order to avoid increasing the debt, but of course, it's not very optimal solution. As for the Bills, the Treasury could simply increase the maturity to stay within the current ceiling salvage auto auction of state. debt. But it does not change the fact that from 24 October, salvage auto auction the government completely run out of cash if the ceiling state. debt is not raised. 5. The cost of CDS on the U.S. is growing, which implies growth of the probability of default. How does it work? The cost of credit default swaps on the United States has increased salvage auto auction significantly in price over the last two weeks. Currently the cost is 5Y CDS 45.5 bp, which is two times higher from the previous week. The volume and size of the nominal debt also increased, although the data for this week are not yet published, and draw conclusions about the current changes prematurely. 1-year CDS spread has more than tripled from 85 bp 20th September to 2.795% (based on the current price of CTD (cheapest to deliver) bonds to CDS). According to our calculations at 43 bp 1-y CDS market is estimated probability of default of 2.7% until 20 December 2014, using the same Bloomberg CDSW, which uses MODIFIED HULL & WHITE MODEL, with the same input, the probability of default traded at 2.89%. CDS on the U.S. work as well as other sovereign CDS. Features of this product is good in "Sovereign CDS: Credit Event and Auction Primer". The main point here is that there is no "grace period" in the form of proposals for the Single Treasury securities. Therefore, the main documents regulating CDS argue that there are only three days from the date of non-payment of principal or interest on the debt, that is not counted salvage auto auction late ISDA as a credit event. If you truly understand all, it must