{"id":17077,"date":"2023-06-02T03:13:18","date_gmt":"2023-06-02T07:13:18","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/what-comes-after-the-debt-ceiling-debacle-opportunity\/"},"modified":"2023-06-02T03:13:20","modified_gmt":"2023-06-02T07:13:20","slug":"what-comes-after-the-debt-ceiling-debacle-opportunity","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=17077","title":{"rendered":"What Comes After The Debt Ceiling Debacle? Opportunity"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture>  <\/picture><figcaption> <\/figcaption><\/figure>\n<\/p>\n<p> <span class=\"table-responsive\"><span class=\"table-scroll-wrapper\"><span data-intersection-boundary=\"start\"><\/span><\/p>\n<table>\n<tr>\n<td>\n<p><strong>Treasury Cash Reserves, T-Bill Issuance Have Room to Rise<\/strong><\/p>\n<p>USD Billions<\/p>\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/Annotated_What-Comes-After-the-Debt-Ceiling-Debacle-Opportunity-display-1_d3.svg.svg+xml\" alt=\"Treasury Cash Reserves, T-Bill Issuance Have Room to Rise\" contenteditable=\"true\" loading=\"lazy\"> <\/picture><figcaption>\n<p class=\"item-caption\"><span>Source: Bloomberg<\/span><\/p>\n<\/figcaption><\/figure>\n<p><strong>Current analysis does not guarantee future results<\/strong><\/p>\n<p>As of May 19, 2023<\/p>\n<\/td>\n<\/tr>\n<\/table>\n<p> <span data-intersection-boundary=\"end\"><\/span><\/span><button class=\"table-enlarge-button\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewbox=\"0 0 16 16\" class=\"table-enlarge-icon\"><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\"><\/path><\/svg>Click to enlarge<\/button><\/span> <\/p>\n<p>The standoff between the White House and Congress over<span class=\"paywall-full-content invisible\"> raising the US debt ceiling has been the talk of the town for months. Now that the government has reached an agreement, savvy investors will be on the hunt for opportunities &#8211; and we think there will be some attractive ones.<\/span><\/p>\n<p class=\"paywall-full-content invisible\">After breaching the $31.4 trillion statutory debt ceiling in January, the US Department of the Treasury resorted to \u201cextraordinary measures\u201d to meet its obligations and keep the federal government solvent. That has meant running its Treasury General Account &#8211; essentially the government\u2019s checking account &#8211; in a tight range and aggressively issuing and paying down T-bills, depending on short-term cash needs.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">But the House of Representatives on Wednesday voted to suspend the country\u2019s debt ceiling for two years, and the bill is expected to win approval in the Senate and be signed into law by President Biden in short order. This would neutralize &#8211; for now &#8211; the risk of an \u201caccidental\u201d default. Perhaps more importantly for investors, it clears the way for the Treasury to replenish its checking account to $500 billion (<em>Display<\/em>) and make good on a backlog of delayed payments.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This may result in a surge of T-bill issuance to increase cash buffers and fund deficits; Wall Street expects anywhere from $1 trillion to $1.5 trillion of new supply by year-end. Indeed, the T-bill curve started cheapening in the days leading up to the X-date of June 5 &#8211; the day the Treasury is expected to run out of cash to pay its bills &#8211; in anticipation of a deal.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The resulting decline in T-bill prices and rise in yields should provide an attractive buying opportunity for investors at the front end of the Treasury curve, particularly relative to overnight index swaps. Possible increases in longer-dated Treasury issuance and the Federal Reserve\u2019s ongoing efforts to shrink its balance sheet may add to overall supply, though that may be tempered somewhat by excess cash in the system tied to the Fed\u2019s reverse repurchase operations.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Increased supply may put pressure on short-term funding markets as repo and commercial paper rates begin to compete with higher T-bill rates, forcing dealers to pay up to finance additional inventory. In other words, for a time, there will likely be too much collateral and not enough available funding. But while we think investors should expect some temporary dislocations, we don\u2019t anticipate liquidity to disappear altogether.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Will this agreement help to avert future clashes over the US debt ceiling? That\u2019s a lot harder to say. The latest standoff was hardly the first market disruption to emerge from a disagreement in Washington. The best investors can do, in our view, is to stay nimble and be prepared to take advantage of the opportunities that these disruptions can create.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Original Post<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Editor&#8217;s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4608972-what-comes-after-the-debt-ceiling-debacle-opportunity?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Treasury Cash Reserves, T-Bill Issuance Have Room to Rise USD Billions Source: Bloomberg Current analysis does not guarantee future results As of May 19, 2023 Click to enlarge The standoff between the White House and Congress over raising the US debt ceiling has been the talk of the town for months. Now that the government [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":17078,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-17077","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Comes After The Debt Ceiling Debacle? 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