The S&P 500 jumped 1.6 percent to 1,326.73 yesterday. Ten- year Treasury note yields lost five basis points to 2.88 percent, and 30-year bond yields fell 12 basis points to 4.19 percent, according to Bloomberg Bond Trader prices.
"The upside in Treasuries has been a function of this new, more robust proposal from the Gang of Six," said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. "There's a reasonable amount of perceived momentum behind that, the concept being that's the type of proposal needed to keep the credit-rating agencies at bay."
Pressuring Republicans
Grover Norquist, head of the anti-tax Americans for Tax Reform that pressures Republicans to hold the line against any tax increase, took an arms-length approach to the Gang of Six proposal.
"It is a mistake to invest one's hopes or fears while the 'plan' remains unclear and subject to change by a Senate Finance Committee selected by Democratic leader Senator Harry Reid," he said in a statement.
McConnell and Reid continued working on a backstop plan to give Obama $2.4 trillion in new borrowing authority in installments. They were discussing empowering a bipartisan group of lawmakers to propose spending cuts to accompany the increases while setting out tough consequences if reductions weren't achieved.
Boehner said Republican leaders are also considering a backup as members of his caucus urged him to repudiate McConnell's plan.
"It is responsible for us to look at what Plan B would look like," Boehner told reporters. "There are a lot of options available to us."
More than 60 Republican lawmakers have signed a letter being circulated by Illinois Representative Joe Walsh urging Boehner not to allow a House vote on McConnell's proposal, said spokeswoman Elizabeth Lauten.
The letter said that McConnell's "plan enables Congress to avoid making the hard decisions."
Reid is keeping keep the Senate in session daily -- including weekends -- until the debt ceiling impasse is resolved. House leaders have also advised members of possible weekend sessions.