The Treasury Department may issue $1.6 trillion in T-bills this year as it rebuilds its coffers after the debt ceiling deal
- The Treasury Department may issue $1.6 trillion in bills over the full year, Deutsche Bank said.
- That's as it looks to rebuild its cash balance following the debt ceiling crisis.
The suspension of the US debt limit has cleared the way for the Treasury Department to refill 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 over the weekend. Analysts at Deutsche Bank estimated in a note Thursday that $1.3 trillion in T-bills will be issued over the remainder of 2023, bringing the total for the full year to about $1.6 trillion.
"The Treasury General Account (TGA) has fallen to an alarmingly low level this week and the subsequent rebuild will likely be one of the largest in debt limit history," analysts wrote.
On Friday, just before the debt limit bill was signed, the cash balance in the TGA was just $23.4 billion, down from $140 billion in mid-May.
That's as the Treasury was relying on "extraordinary measures" to stay under the debt limit while still finding enough money to pay the US government's bills on time.
From June to August, Deutsche Bank predicted that cumulative issuance over the three-month period could top out at $800 billion, "somewhat above the median estimates of primary dealers for the market's capacity to digest bill supply over a short-term."
By September, analysts expects the Treasury Department will have restored its cash balance to about $600 billion.
The Treasury has already started rebuilding its cash, and issued one-day 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 the T-bills will suck up liquidity from 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 the debt issuance and the effect of the Federal Reserve's quantitative tightening.
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