Treasury Department could issue $1.6 trillion in Treasuries this year as it replenishes coffers after debt ceiling deal

Janet Yellen

Janet Yellen.Andrew Harnik/AP

  • The Treasury Department could issue $1.6 trillion in notes throughout the year, Deutsche Bank said.

  • That’s when it seeks to rebuild its cash balance following the debt ceiling crisis.

  • On Friday, just before the debt limitation bill was signed, the balance was just $23.4 billion.

The suspension of the US debt limit has paved the way for the Treasury Department to bail out its coffers, and a tsunami of borrowing is expected in the coming months.

Congress passed a debt ceiling bill last week and President Joe Biden signed it into law over the weekend. Deutsche Bank analysts estimated in a note Thursday that $1.3 trillion in Treasuries will be issued over the remainder of 2023, bringing the total for the full year to around $1.6 trillion.

“The Treasury General Account (TGA) fell to an alarming level this week and the subsequent rebuild is likely to be one of the largest in debt ceiling history,” the analysts wrote.

On Friday, just before the signing of the debt limitation bill, the TGA’s cash balance was just $23.4 billion, down from $140 billion in mid-May.

That’s when the Treasury relied on “extraordinary measures” to stay below the debt ceiling while finding enough money to pay US government bills on time.

From June to August, Deutsche Bank predicted that cumulative issuance over the three-month period could reach $800 billion, “slightly above median estimates by primary traders for the market’s ability to digest supply of short-term bills”.

By September, analysts expect the Treasury Department to have restored its cash balance to around $600 billion.

The Treasury has already started to replenish its cash and issued overnight cash management bills, which matured on Tuesday.

The department also announced plans last week to sell $65 billion in three-month bills and $58 billion in six-month bills on Monday and settle them on Thursday.

But all Treasuries will suck cash out of the financial system, potentially weighing on markets. JPMorgan recently estimated that the combined performance of stocks and bonds this year will suffer by nearly 5% due to debt issuance and the effect of the Federal Reserve’s quantitative tightening.

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