{"id":12914,"date":"2023-05-24T00:40:40","date_gmt":"2023-05-24T04:40:40","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/a-debt-ceiling-deal-will-spark-a-new-worry-who-will-buy-the-deluge-of-treasury-bills\/"},"modified":"2023-05-24T00:40:41","modified_gmt":"2023-05-24T04:40:41","slug":"a-debt-ceiling-deal-will-spark-a-new-worry-who-will-buy-the-deluge-of-treasury-bills","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=12914","title":{"rendered":"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?"},"content":{"rendered":"
\n

When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by the protracted standoff in Washington, D.C., over the government\u2019s borrowing limit.<\/p>\n

The question is, who will buy them and at what price?<\/p>\n

\n

Treasury bills are debt issued by the U.S. government that mature in four to 52 weeks. New bill issuance could reach about $1.4 trillion through the end of 2023, with roughly $1 trillion flooding the market before the end of August, according to an estimate from BofA Global strategists.<\/p>\n

They expect the deluge through August to be about five times the supply of an average three-month stretch in years before the pandemic.<\/p>\n

\u201cThe good news is that we have a high degree of confidence around who is going to buy it,\u201d said Mark Cabana, rates strategist at BofA Global, in a phone interview with MarketWatch. \u201cThe bad news is that it\u2019s not going to be at current levels. Things have to cheapen.\u201d <\/p>\n

Cabana sees a key buyer of bill supply unleashed by a debt-ceiling deal in money-market funds, which have climbed to nearly $5.4 trillion in assets managed since the regional banking crisis erupted in March (see chart). <\/p>\n

So people who yanked billions of dollars in deposits from banks after the collapse of Silicon Valley Bank in March and parked them in money-market funds could end up playing an encore performance in this year\u2019s debt-ceiling drama.<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

Related<\/strong>: Money-market funds swell to record $5.4 trillion as savers pull money from bank deposits<\/p>\n

$2 trillion at Fed repo facility<\/h2>\n

Money-market funds have been the main reason why at least $2 trillion consistently sits overnight at the Federal Reserve\u2019s reverse repo facility. The program was last offering a roughly 5% rate, a level Cabana said new Treasury bills might need to exceed by about 10-20 basis points. <\/p>\n

\u201cIt\u2019s an unintended consequence of a debt-ceiling deal getting done,\u201d said George Catrambone, head of fixed income Americas at DWS Group, about market expectations for heavy short-term Treasury bill issuance, but he also expects money-market funds, foreign buyers and other institutions auctions to continue as buyers in the market.<\/p>\n

\u201cThere\u2019s always buyers. It\u2019s a question of price.\u201d<\/p>\n

President Joe Biden and House Speaker Kevin McCarthy, R-Calif. met Monday to talk about potential ways to raise the $31.4 trillion borrowing limit and to avoid a \u201cdoomsday\u201d scenario in financial markets if the U.S. defaults. <\/p>\n

Congress has struck deals each time U.S. public debt has exceeded its debt ceiling in the past, including by suspending it eight times since 2016 (see chart).<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

That doesn\u2019t mean financial markets sit by idly. The 1-month Treasury yield
\n TMUBMUSD01M,
\n 5.516%<\/bg-quote>
\n rose to almost 5.6% on Tuesday, while the 3-month yield
\n TMUBMUSD03M,
\n 5.287%<\/bg-quote>
\n was 5.3%, according to FactSet. Bill maturing around the \u201cX-date,\u201d which could come as soon as June 1, have even higher yields.<\/p>\n

Read<\/strong>: Debt-ceiling angst sends Treasury bill yields toward 6% <\/p>\n

\u201cThose are obviously pretty heady yields,\u201d Catrambone said. \u201cBut it also exemplifies the market having to price in potential market disruptions in the month of June,\u201d even though his team, like many in financial markets, expect that eventually \u201ccooler heads will prevail\u201d in Washington as the debt-ceiling standoff heads down to the wire.<\/p>\n

How the money ran out<\/h2>\n

The Treasury in January hit its borrowing limit and began operating under \u201cextraordinary measures\u201d to avoid a default.<\/p>\n

Cash balances at the Treasury Department have since dwindled to less than $100 billion, according to economists at Jefferies. Barclays strategists estimate its cash balance may\u00a0fall below $50 billion between June 5-15.<\/p>\n

\u201cBasically, we are just draining our cash account to fund operations while we wait to figure out the debt ceiling,\u201d said Lindsay Rosner, senior portfolio manager at PGIM Fixed Income. <\/p>\n

But when the battle over the debt limit ends in a resolution, she expects longer-dated Treasury yields to increase, as haven buying on fears of potentially a full U.S. government default and a credit rating downgrade will have been taken off the table.<\/p>\n

\u201cThe Armageddon, whatever small probability people were pricing in of catastrophe, remove that,\u201d she said. \u201cAnd that means the worst economic outcome has been removed.\u201d<\/p>\n

That\u2019s also a reason why Rosner has been avoiding ultrashort Treasurys in the eye of the debt-ceiling fight in favor of 2, 3 or 4-year bonds offering some of the highest yields in years.<\/p>\n

\u201cWe\u2019re being afforded good yield, good spread, a couple of years out the curve,\u201d she said. \u201cPlay that game.\u201d<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by the protracted standoff in Washington, D.C., over the government\u2019s borrowing limit. The question is, who will buy them and at what price? Treasury bills are debt issued by […]<\/p>\n","protected":false},"author":1,"featured_media":12915,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-12914","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nA debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? | iFintechWorld<\/title>\n<meta name=\"description\" content=\"When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=12914\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=12914\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-05-24T04:40:40+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-05-24T04:40:41+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1684903240_social.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"640\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=12914#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=12914\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?\",\"datePublished\":\"2023-05-24T04:40:40+00:00\",\"dateModified\":\"2023-05-24T04:40:41+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=12914\"},\"wordCount\":768,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"Markets\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=12914#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=12914\",\"url\":\"https:\/\/ifintechworld.com\/?p=12914\",\"name\":\"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-05-24T04:40:40+00:00\",\"dateModified\":\"2023-05-24T04:40:41+00:00\",\"description\":\"When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=12914#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=12914\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=12914#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? | iFintechWorld","description":"When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=12914","og_locale":"en_US","og_type":"article","og_title":"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? | iFintechWorld","og_description":"When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by","og_url":"https:\/\/ifintechworld.com\/?p=12914","og_site_name":"iFintechWorld","article_published_time":"2023-05-24T04:40:40+00:00","article_modified_time":"2023-05-24T04:40:41+00:00","og_image":[{"width":1280,"height":640,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1684903240_social.jpeg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=12914#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=12914"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?","datePublished":"2023-05-24T04:40:40+00:00","dateModified":"2023-05-24T04:40:41+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=12914"},"wordCount":768,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["Markets"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=12914#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=12914","url":"https:\/\/ifintechworld.com\/?p=12914","name":"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills? | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-05-24T04:40:40+00:00","dateModified":"2023-05-24T04:40:41+00:00","description":"When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=12914#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=12914"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=12914#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?"}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/12914","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12914"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/12914\/revisions"}],"predecessor-version":[{"id":12916,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/12914\/revisions\/12916"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/12915"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12914"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12914"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12914"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}