U.S. House Speaker John Boehner (R-OH) arrives to speak to the media on the ''fiscal cliff'' on Capitol Hill in Washington, December 21, 2012.

WILLIAMSBURG, Virginia | Fri Jan 18, 2013 2:59pm EST

WILLIAMSBURG, Virginia (Reuters) - House Republican leaders on Friday said they would seek to pass a three-month extension of federal borrowing authority next week to buy time - on pain of losing their own paychecks - for the Democratic-controlled Senate to pass a budget plan that shrinks budget deficits.

The plan, hatched at a House Republican retreat, marks a new strategy from the party to break a budget deadlock by forcing the Senate to act first.

The Treasury needs congressional authorization to raise the current $16.4 trillion limit on U.S. debt sometime between mid-February and early March.

The Senate has not passed a formal budget resolution in nearly four years, while the House has passed budgets that have died in the Senate.

Under the planned legislation, House Majority Leader Eric Cantor said if the Senate or the House fail to pass a budget by April 15, lawmakers' pay would be withheld.

"Next week, we will authorize a three-month temporary debt limit increase to give the Senate and House time to pass a budget," Cantor said in an emailed statement.

"If the Senate or House fails to pass a budget in that time, members of Congress will not be paid by the American people for failing to do their job. No budget, no pay," he said on the last day of a House Republican retreat in Williamsburg.

U.S. House Speaker John Boehner said there should be no long-term increase in the federal debt limit until the Senate passes a budget, and House Republicans will try to force the Senate into action to cut spending.

"We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government's spending problem. The principle is simple: no budget, no pay," Boehner said in excerpts of his closing remarks to the retreat at a golf resort in Williamsburg.

Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid, said the Senate would consider the increase if it was "clean."

"It is reassuring to see Republicans beginning to back off their threat to hold our economy hostage," Jentleson said in an emailed statement. "If the House can pass a clean debt ceiling increase to avoid default and allow the United States to meet its existing obligations, we will be happy to consider it."

Congress has relied largely on stop-gap funding measures to keep government agencies and programs running.

A House Republican leadership aide said it was not currently anticipated that the three-month debt limit increase legislation would include spending cuts. Although Boehner has previously sought at least $1 in long-term spending cuts for every dollar of debt limit increase, the aide said that the reforms associated with requiring budgets from both chambers would meet the speaker's requirements.

Spending cuts would be demanded of any longer term debt limit increase, the aide said, and Congress would still have to continue dealing with two other fiscal deadlines, the March 1 launch of automatic spending cuts, and government funding legislation that is needed by March 27.

(Reporting by David Lawder; Editing by Jackie Frank)

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n">(Reuters) - U.S. money managers cut their equity holdings to the lowest in three months in September despite a strong rally in U.S. stock markets, increasing their allocation in bonds to the highest in four, a Reuters poll found on Thursday.

The poll of 15 U.S. fund managers taken Sept 14-26, showed a drop in the average equity allocation in a global balanced portfolio to 62.6 percent, the lowest since June, from 64.6 percent in August.

That came despite a nearly 2 percent rally in the benchmark S&P 500 so far this month and a 16 percent rally since a recent trough in June. The MSCI world stock index is also up about 2 percent this month.

Investors in the asset allocation poll, as well as strategists the Reuters global stock market poll published on Wednesday, said that the "fiscal cliff" of tax increases and spending cuts at the start of the new year have made many investors cautious.

"We feel that (the S&P 500) is more likely to see modest moves upward in the near term, potentially declining as concerns surrounding the fiscal cliff come to bear near the end of the year," said Douglas Gordon, senior investment strategist at Russell Investments.

At the same time, the average bond allocation rose to 30.1 percent in September from 27.6 percent last month.

A chunk of that came from a rise in allocations to euro zone bonds, which followed the European Central Bank's announcement on September 6 that it intended to buy peripheral euro zone bonds in an attempt to bring down yields.

"We feel that this partially mitigates downside risks but certainly doesn't remove them. Questions remain surrounding longer term structural issues in Europe," said Gordon.

But it has become clear over recent days that Spain is very close to asking for a full international bailout. Allocations to euro zone equities by U.S. fund managers slipped slightly in September.

On the whole, government bonds attracted an average 39.7 percent of the firms' model allocation, up from 38.6 percent previous month. Firms allocated 10.9 percent of their global bond investments to the euro zone, up from 9.5 percent.

Stock markets broadly have rallied over the past few months in anticipation of a third round of bond purchases from the U.S. Federal Reserve.

On September 13, the Fed announced $40 billion purchases per month of agency mortgage-backed securities, pledging it would continuing buying bonds until there was a meaningful improvement in the moribund U.S. job market.

But allocations to U.S. and Canadian stocks fell in the latest Reuters asset allocation poll, together attracting 65.1 percent of the firms' overall stock exposure, down from 66 percent in August, and the lowest since June.

Apart from the threat of the "fiscal cliff" in the U.S., slowing growth in China, Latin America, and Europe have weighed on market sentiment, said David Goerz, chief investment officer of HighMark Capital Management.

Investors also allocated more to alternate forms of credit ranging from credit default swaps to agency mortgage backed-securities, which the Fed targeted in massive quantities in its latest stimulus plan.

Such credit accounted for 16.2 percent of bond investments, up from 15.3 percent last month.

(Reporting by Sam Forgione, Rahul Karunakar, Ruby Cherian, Deepti Govind; Editing by John Stonestreet)

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