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The partisan standoff over the debt limit, which hardened over the weekend when 43 Senate Republicans said they would not support a clean debt-limit increase, sets the stage for severe turbulence in the financial markets, experts warn. 

The yield on Treasury bonds maturing next month spiked last week, signaling that investors are already preparing for the possibility that President Biden and Republican leaders in Congress won’t reach a deal before the Treasury Department runs out of money next month.  

Biden will meet with the top four congressional leaders at the White House Tuesday to discuss how to avoid a default, but lawmakers expect little progress from the meeting. It’s the first face-to-face meeting between Biden and Speaker Kevin McCarthy since Feb. 1. 

There’s growing pessimism in Washington and the financial markets that political leaders will negotiate a long-term deal by early June, the deadline set by Treasury Secretary Janet Yellen.  

If an agreement doesn’t come together in the next month, congressional leaders will have to agree to a short-term extension of the debt limit to give themselves more time to negotiate.  More debt ceiling coverage from The Hill: Pressure grows on Biden to bend in debt ceiling talks Debt limit battle: How we got here

Without a short-term agreement, the US would go past the so-called “X-date” and face major turmoil in the markets.  

“I genuinely believe there’s a better-than-50-percent chance that there will be default, it will occur over a weekend and when the chaos it creates becomes obvious to all the players, they’ll have to reach some sort of accommodation,” said former Sen. Judd Gregg (R-N.H.), who previously served as Senate Budget Committee chairman and an advisor to Senate Republican Leader Mitch McConnell’s (Ky.) leadership team. 

“The potential is pretty dire,” he warned. “Right now, you don’t have the leadership to solve the problem, that’s the bottom line.” 

Gregg said McCarthy faces a challenge to his speakership if he brings a debt-limit bill to the House floor without major fiscal reforms, but the cuts that he’s proposing don’t have a chance of passing the Senate. 

McConnell’s support for a letter signed by 43 Senate Republicans declaring they will not support “any bill that raises the debt ceiling without substantive spending and budget reforms” has failed to move Democrats away from insisting on a clean debt-ceiling increase.  

“I don’t know what Democrats have to negotiate,” said a senior Senate Democratic aide, who pointed out that Republicans agreed to raise the debt limit three times under former President Trump without drama. “We’re not the ones being inconsistent.” 

“At the end of the day, a lot of their behavior is playacting,” the aide said, predicting a spike in stock and bond market volatility will pressure Republicans into backing off their demands. “They have investments, too.” 

The aide, pointing to the downgrade of the nation’s credit rating in the 2011 debt-limit standoff, said that this year’s battle in Washington over the debt ceiling would also shake the financial markets.

“We have in the past. I don’t know why this would be different,” the aide said.  

Financial markets are already starting to show signs of stress related to the impasse over the debt ceiling. 

One-month Treasury bills maturing around a projected date in early June, when the government could run out of money, saw their yields spike to 5.76 percent last week. 

Yields have climbed far above recent averages closer to 4.5 percent and significantly higher than the recent low of 3.3 percent in April. 

“The Treasury bills curve appears to imply risk of disruption in June, July, and October,” Goldman Sachs chief economist Jan Hatzius wrote in a note last week to investors. 

Treasury bills maturing in early June were trading at more than a 50-basis point discount compared to May and July at the end of last week. 

“Investors are paying a healthy premium to own bills that mature in May while demanding hefty compensation to hold T-bills that are maturing in the first half of June,” analysts for Wells Fargo wrote in a note to investors last week. 

Wall Street insurance policies, which are known as credit default swaps, against one-year Treasuries hit a record-high spread of 1.77 percent late last week in a spike that was notable both for its timing and its size. 

“There is likely genuine fear that a divided government and increased political polarization could make finding a solution less likely. Meanwhile, the dual threats of rising deficits (with larger federal payments, some indexed to inflation) and higher Treasury debt service costs also increase the chance of an accident, contributing to the higher perceived riskiness of owning US debt,” Deutsche Bank analyst Steven Zeng wrote in a May 5 note. 

Uncertainty in the Treasury market, which is already dealing with one of the fastest quantitative tightening cycles in decades, could spell more trouble for the U.S. banking sector. 

Sen. John Cornyn (Texas), an advisor to the Senate Republican leadership team, said local and regional banks in his state worried about losing deposits. 
“This is a very dangerous situation. There’s been a big shift in deposits to places people perceive as safer,” he said. “All of them are nervous, our community bankers, our regional bankers. We need to try to calm this down.”  

Cornyn said the possibility of a national default isn’t helping to calm the jittery banking sector. 

“I think it’s creating unnecessary anxiety,” he said.  

One senior Senate Republican aide warned that a drop in demand for Treasury securities could trigger a broader market selloff.  

Treasury security auctions will likely become increasingly sensitive to the Treasury Department’s looming X-date, analysts say.  

“Yields are elevated beginning with the June 6 maturity, which the Treasury in January suggested was the soonest the Treasury could exhaust resources under the debt limit. The yield is highest around mid- to-late-July maturities, when we think the Treasury will have exhausted resources under the debt limit if it has not in June,” analysts for Goldman Sachs wrote. 

Auctions scheduled for this Thursday for four-week and eight-week bills due to mature within this time frame could see some additional stress, as could auctions on May 25, June 8 and June 15. 

The Bipartisan Policy Center argued in an analysis published Tuesday that “managing Treasury security auctions and meeting all obligations will become increasingly challenging as reserves dwindle.”  

“Concerns are also mounting that the country could find itself in a similar position to 2011, when Standard & Poor’s downgraded the U.S. from its AAA rating,” the think tank said. 

Yellen warned in an interview with ABC’s “This Week” that “it’s widely agreed that financial and economic chaos will ensue” if Congress fails to act by the deadline.   Debt limit battle: How we got here US could default on national debt as soon as early June: analysis

A report published by the Penn Wharton Budget Model Monday said the deadline to raise the nation’s debt ceiling will hit sooner than previously thought because tax receipts in April fell below projections.  

Alexander Arnon, the director of business tax and economic analysis for the Penn Wharton Budget Model, said “we found, as noted by the Treasury secretary and by the Congressional Budget Office, that tax receipts in April came in quite a bit lower.”  

“There was a drop off [in tax receipts] relative to what was expected and we are much closer [to default] than people had hoped earlier this year,” he said.  

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Deion announces he battled, beat bladder cancer

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Deion announces he battled, beat bladder cancer

BOULDER, Colo. — University of Colorado football coach Deion Sanders announced Monday that he had undergone surgery to remove his bladder after doctors discovered a tumor there. Sanders said, since the surgery, there are no traces of cancer, and he will continue to coach this season.

In a packed Touchdown Club in the Dal Ward Athletic Center, Sanders appeared with Dr. Janet Kukreja, director of urological oncology at University of Colorado Cancer Center, and answered some of the questions that have swirled around him throughout the offseason.

The 57-year-old Sanders has largely been out of the public eye in recent months, save for an appearance at Big 12 media days earlier this month when he acknowledged Big 12 commissioner Brett Yormark for repeatedly checking in on him and praised Colorado athletic director Rick George.

Sanders deflected questions about his health at Big 12 media days and previously had not publicly offered any specifics. In July his son, Deion Jr., posted a video on social media in which Deion Sanders is heard saying he was dealing with a health issue and that “I ain’t all the way recovered.”

In the video he was seen stepping into an ice bath as well as shooting a basketball and a walk with his daughter. Sanders said in May he had lost about 14 pounds as he had limited contact around the program during the team’s spring and summer workouts.

Sanders has previously dealt with serious health issues. He has had bouts with blood clots in his legs, had two toes amputated in 2022 and emergency surgery in June 2023 to treat the persistent clots, including one in his thigh in one leg and several just below his knee in his other leg.

On the field, Sanders is set to begin his third season at the school. With his son, Shedeur, at quarterback and Heisman Trophy winner Travis Hunter, college football’s most accomplished two-way player in the modern era, the Buffaloes finished 9-4 last season with an Alamo Bowl appearance. Sanders’ son Shilo, a safety for the Buffaloes for the past two seasons, has also moved on to the NFL, along with several high-profile players on offense.

The top storyline on the field for the Buffaloes is the battle to replace Shedeur behind center. In two seasons, Sanders completed 71.8% of his passes for 7,364 yards with 64 touchdowns.

It will be the first season Deion Sanders doesn’t coach a high school or college team with Shedeur at quarterback.

Seventeen-year-old true freshman Julian Lewis, a five-star recruit and No. 2 player in the 2025 ESPN 300, and Kaidon Salter, who started 24 games in four seasons at Liberty, will compete for the job.

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Sports

Guardians’ Clase on leave over gambling probe

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Guardians' Clase on leave over gambling probe

Cleveland Guardians closer Emmanuel Clase on Monday was placed on non-disciplinary paid leave through Aug. 31 as part of Major League Baseball’s investigation into sports gambling, the second Guardians pitcher to be caught up in the inquiry.

Guardians right-hander Luis Ortiz remains on non-disciplinary paid leave after originally being placed there July 3 after unusual gambling activity on two pitches he threw for balls, sources told ESPN. Ortiz’s leave was later extended to Aug. 31.

In a statement, the Guardians said “no additional players or club personnel are expected to be impacted” by the investigation. The investigation, a source confirmed, has not turned up information tying other players with the team to sports gambling.

Clase, 27, is a three-time All-Star and two-time winner of the Mariano Rivera Award as the best relief pitcher in the American League. He finished third in AL Cy Young voting last year when he posted a 0.61 ERA over 74.1 innings. In 47.1 innings this season, Clase has a 3.23 ERA and has already allowed more hits this year (46) than last (39) while striking out 47 and walking 12.

His ties to the investigation that started following a June 27 alert from IC360, a firm that monitors betting markets for abnormalities, are unclear. Sportsbooks and gambling operators were alerted after a spike in action on Ortiz’s first pitch in the bottom of the second inning against the Seattle Mariners on June 15 and in the top of the third inning against the St. Louis Cardinals on June 27, according to sources. In both cases, unusual amounts of money were wagered on the pitches being a ball or hit-batsman from betting accounts in New York, New Jersey and Ohio, according to a copy of the IC360 alert obtained by ESPN. Both pitches wound up well outside the strike zone.

At the All-Star Game in mid-July, MLB commissioner Rob Manfred said while he still supports legal gambling because of the transparency regulation offers, he was concerned about so-called microbets, such as ones that offer action on individual pitches.

“There are certain types of bets that strike me as unnecessary and particularly vulnerable,” Manfred said. “I know there was a lot of sports betting, tons of it that went on illegally and we had no idea, no idea what threats there were to the integrity of the play because it was all not transparent,” he added. “I firmly believe that the transparency and monitoring that we have in place now, as a result of the legalization and the partnerships that we’ve made, puts us in a better position to protect baseball than we were in before.”

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Politics

Big brands are sleepwalking when it comes to stablecoins

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Big brands are sleepwalking when it comes to stablecoins

Big brands are sleepwalking when it comes to stablecoins

With Amazon and Walmart exploring stablecoins, institutions may be underestimating potential exposure of customer data on blockchains, posing risks to privacy and brand trust.

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