The Senate and the House will vote on a debt deal later in the day, and it is expected to pass. The deal would extend the government's borrowing authority until February 7, which would remove the risk of default. The deal also would fund the government until January 15, ending the shutdown. It would provide more time for negotiations, but it does not bring the two sides any closer to reaching a long-term agreement on the major fiscal issues.
Reports of the imminent deal caused the stock market to move sharply higher. For MBS markets, the deal was also positive. Without a longer-term resolution to the fiscal issues, the Fed may be hesitant to begin to taper its bond purchases well into 2014. Today's other economic news had little impact.
The October NAHB Home Builders confidence index dropped from September to the lowest level since June. The Fed's Beige Book report ed "modest to moderate" economic growth in all regions, despite the government shutdown. The Dow is up 200 points.
Tomorrow, Jobless Claims, Housing Starts, Industrial Production, and Philly Fed are scheduled.
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