Schumer and McConnell may announce debt ceiling raise this week

Senate Majority Leader Chuck Schumer may be able to announce an agreement this week that will raise the federal borrowing limit and make sure the U.S. government doesn't default, according to analysts.

The New York Democrat and Senate Minority Leader Mitch McConnell, the Kentucky Republican, come after a standoff over the debt ceiling in October. There have been signs that this month might provide smoother sailing on this issue.

There are several ways to raise it relatively painlessly if Schumer and McConnell don't see the upside in engaging in such brinkmanship this time around. That could include a punt-and- raise, where there is a short-term increase via regular order, followed by a longer-term increase via reconciliation, said Ben Koltun, director of research at Beacon Policy Advisors.

Another option is to use the National Defense Authorization Act NDAA to set out an expedited process for Democrats to raise the debt ceiling via reconciliation. We expect that Schumer will announce a bipartisan path on the debt ceiling this week. Budget reconciliation is a process for passing legislation through a simple Senate majority with 51 votes.

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Ed Mills, a Washington policy analyst at Raymond James, said that although the defense ITA bill was stalled in the Senate last week, reports indicate that a compromise bill from the House could break the impasse as soon as this week.

Mills said that a debt limit measure is being looked at for inclusion in the NDAA. While there are mixed chances for it to advance as part of the defense package, a combined bill would be a major breakthrough for the year-end agenda. This would leave Senate confirmations and the finalization of the BBB bill as the remaining items assuming no other crisis emerges which could play positively into the chances of BBB being finalized. BBB refers to President Joe Biden's Build Back Better Act, a $2 trillion social-spending and climate package that Schumer hopes to pass by Christmas.

Schumer promised last week that his chamber would take action on raising the federal government's borrowing limit by December 15, which is the date when the Treasury Department said it could be left with insufficient resources.

The Congressional Budget Office estimates that the Treasury would run out of cash by the end of December if the debt ceiling isn't raised, while the Bipartisan Policy Center believes that the government is most likely to have insufficient cash to meet its financial obligations sometime between December 21 and January 28.

Budget experts think the Treasury can stumble through the next two weeks before there is a real crisis, but waiting until after Christmas is viewed as risky, said Greg Valliere, chief U.S. policy strategist at AGF Investments.

We believe that Chuck Schumer will have to cave with the Democrats embracing the reconciliation process to raise the ceiling. Could it be attached to the defense bill? Perhaps key leaders are lukewarm. We do not anticipate a U.S. default. Schumer told his fellow Democratic senators in a letter on Monday that they should prepare to work during the upcoming weekend.

We expect to receive nominations and a final conference agreement on NDAA this coming week. Senators should prepare for possible weekend votes due to the time it takes to process those items in the Senate without cooperation, he wrote.

U.S. stock gauges DJIA, SPX, traded higher Monday as investors digested the latest news on the spread of the coronaviruses and prepared for new inflation data later in the week.